Applied Cointegration Analysis in the Mirror of Macroeconomic Theory

Paul Söderlind and Anders Vredin (anders.vredin@riksbank.se)

Journal of Applied Econometrics, 1996, vol. 11, issue 4, 363-81

Abstract: Cointegration analyses of macroeconomic time series are often not based on fully specified theoretical models. We use a theoretical model to scrutinize common procedures in applied cointegration analysis. Monte Carlo experiments show that 1) some tests of the cointegration vectors do not work well on series generated by an equilibrium cycle model; (2) cointegration restrictions add little to forecasting; (3) structural VAR models based on weak long-run restrictions seem to work well. The main disadvantages of cointegration analysis without strong links to economic theory are that it makes it hard to estimate and interpret the cointegration vectors. Copyright 1996 by John Wiley & Sons, Ltd.

Date: 1996
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Related works:
Working Paper: Applied Cointegration Analysis in the Mirror of Macroeconomic Theory (1995)
Working Paper: Applied Conintegration Analysis in the Mirror of Macroeconomic Theory (1994)
Working Paper: Applied Cointegration Analysis in the Mirror of Macroeconomic Theory (1994)
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