An augmented autoregressive distributed lag bounds test for cointegration

Chung Yan Sam, Robert McNown and Soo Khoon Goh

Economic Modelling, 2019, vol. 80, issue C, 130-141

Abstract: An augmented autoregressive distributed lag (ARDL) bounds test for cointegration involves an extra F-test on the lagged levels of the independent variable(s) in the ARDL equation. Originally, this testing strategy was introduced using the bootstrap procedure. This paper provides both the small sample and asymptotic critical values for easier implementation of the test, making it applicable for a broader range of researchers. Two advantages of this augmented ARDL bounds test are that the assumption of an I(1) dependent variable is not necessary, and a clear conclusion on the cointegration status is provided by the three tests. The augmented ARDL bounds test is demonstrated using an empirical study on government taxation and expenditures. The tests support the tax-and-spend hypothesis of the budgetary policy for the US, the UK, and France.

Keywords: ARDL bounds test; Cointegration; Degenerate case; Lagged independent variable(s) test (search for similar items in EconPapers)
JEL-codes: C12 C32 C63 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:80:y:2019:i:c:p:130-141

DOI: 10.1016/j.econmod.2018.11.001

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