SPURIOUS REGRESSION AND COINTEGRATION. NUMERICAL EXAMPLE: ROMANIA’S M2 MONEY DEMAND

Gheorghe Ruxanda () and Andreea Botezatu ()
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Gheorghe Ruxanda: Academy of Economic Studies, Bucharest
Andreea Botezatu: Academy of Economic Studies, Bucharest

Journal for Economic Forecasting, 2008, vol. 5, issue 3, 51-62

Abstract: Economic time series are, in their vast majority, integrated series so, their modelling procedure stumbles upon the problem of spurious regression. When existent, cointegration is the simplest way of eliminating the illogical correlation established between time series due to the presence of trends. The analysis of macroeconomic time series through cointegration is a common fact. Modelling the Romanian M2 money demand through cointegration and vector error correction led to somewhat significant results being a starting point for future, more complex research.

Keywords: spurious regression; cointegration; money demand; error correction mechanism. (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 C52 E41 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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