Distribution approximations for cointegration tests with stationary exogenous regressors

Jurgen Doornik and H. Peter Boswijk ()

Journal of Applied Econometrics, 2005, vol. 20, issue 6, 797-810

Abstract: The distribution of a functional of two correlated vector-Brownian motions is approximated by a Gamma distribution. This functional represents the limiting distribution for cointegration tests with stationary exogenous regressors, but also for cointegration tests based on a non-Gaussian likelihood. The approximation is accurate, fast and easy to use in comparison with both tabulated critical values and simulated p-values. The proposed procedure is applied to a UK model investigating purchasing power parity. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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DOI: 10.1002/jae.811

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