Testing for an irrelevant regressor in a simple cointegration analysis
Daniel Ventosa-Santaulària ()
Economics Bulletin, 2010, vol. 30, issue 2, 1333-1345
This paper investigates the asymptotic behavior of the t-ratio associated to an irrelevant variable in a three-variable cointegration analysis. It is proved that the t-ratio converges to a non-standard distribution suitable for statistical inference. Although the test-statistic is not pivotal when the innovations are serially correlated, Monte Carlo evidence suggests that the size distortion can be considerably mitigated by means of HAC standard errors.
Keywords: Irrelevant variables; cointegration; t-ratio; statistical inference (search for similar items in EconPapers)
JEL-codes: C1 C3 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-09-00715
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