On spurious regressions with partial unit root processes

Yundong Tu

Economics Letters, 2017, vol. 150, issue C, 142-145

Abstract: This paper considers spurious regressions with partial unit root and near partial unit root processes. Three models are investigated via simulations to study the rejection probability of the associated t-statistics in detecting the spurious correlation. The results reveal that the spurious regression is a not-so-spurious problem, which cannot be eliminated by adding AR(1) errors in re-estimation. Moreover, the advocated balanced regression approach is found effective in detecting the non-existent relationship.

Keywords: Balanced regression; Partial near unit root; Spurious regression (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:150:y:2017:i:c:p:142-145

DOI: 10.1016/j.econlet.2016.11.028

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