A Gaussian Test for Cointegration
Gulasekaran Rajaguru () and
Tilak Abeysinghe ()
SCAPE Policy Research Working Paper Series from National University of Singapore, Department of Economics, SCAPE
We use a mixed-frequency regression technique to develop a test for cointegration under the null of stationarity of the deviations from a long-run relationship. What is noteworthy about this MA unit root test, based on a variance-difference, is that, instead of having to deal with non-standard distributions, it takes the testing back to the normal distribution and offers a way to increase power without having to increase the sample size substantially. Monte Carlo simulations show minimal size distortions even when the AR root is close to unity and that the test offers substantial gains in power against near-null alternatives in moderate size samples. An empirical exercise illustrates the relative usefulness of the test further.
Keywords: Null of stationarity; MA unit root; mixed-frequency regression; variance difference; normal distribution; power. (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 32 pages
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-sea
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Working Paper: A Gaussian Test for Cointegration (2010)
Working Paper: A Gaussian Test for Cointegration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:sca:scaewp:0905
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