Fractional cointegrating regressions in the presence of linear time trends

Uwe Hassler and Francesc Marmol

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: We consider regressions of nonstationary fractionally integrated variables dominated by linear time trends. The regression errors are short memory, long memory or even nonstationary, and hence allow for a very flexible cointegration model. In case of simple regressions, least squares estimation gives rise to limiting normal distribucions independently of the order of integration of the regressor, whereas the customary t-statistics diverge. We also investigate the possibility of testing for mean reverting equilibrium deviations by means of a residual-based log-periodogram regression. Asymptotic results become more complicated in the multivariate case.

Keywords: Nonstationary; regressors; Stationary; or; nonstationary; errors; Limiting; normality; Residual-based; cointegration; testing (search for similar items in EconPapers)
JEL-codes: C15 C22 C32 (search for similar items in EconPapers)
Date: 1998-01
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: FRACTIONAL COINTEGRATING REGRESSION IN THE PRESENCE OF LINEAR TIME TRENDS (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:9794

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