Spurious Regression and Econometric Trends
Antonio Noriega () and
Daniel Ventosa-Santaulària ()
No 2006-05, Working Papers from Banco de México
This paper analyses the asymptotic and finite sample implications of different types of nonstationary behavior among the dependent and explanatory variables in a linear spurious regression model. We study cases when the nonstationarity in the dependent and explanatory variables is deterministic as well as stochastic. In particular, we derive the order in probability of the t-statistic in a linear regression equation under a variety of empirically relevant data generation processes, and show that the spurious regression phenomenon is present in all cases considered, when at least one of the variables behaves in a nonstationary way. Simulation experiments confirm our asymptotic results.
Keywords: Spurious regression; trends; unit roots; trend stationarity; structural breaks (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://www.banxico.org.mx/publicaciones-y-discurso ... -99169DAD13D1%7D.pdf (application/pdf)
Working Paper: Spurious regression and econometric trends (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2006-05
Access Statistics for this paper
More papers in Working Papers from Banco de México Contact information at EDIRC.
Bibliographic data for series maintained by Dirección de Sistemas ().