A cautionary note on cointegration testing

Michael Sumner

Applied Economics Letters, 2004, vol. 11, issue 5, 275-278

Abstract: Inferences from the Johansen procedure regarding cointegration, and the magnitude, significance and even the sign of the estimated parameters of a familiar macroeconomic relation, are shown to be extremely sensitive to the treatment of its deterministic components and to the assumed lag structure. An unrestricted error-correction model yields unambiguous inferences and performs better in a range of tests.

Date: 2004
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DOI: 10.1080/1350485042000191728

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