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Canonical Cointegrating Regression and Testing for Cointegration in the Presence of I(1) and I(2) Variables

Published online by Cambridge University Press:  11 February 2009

In Choi ,
Joon Y. Park  and
Byungchul Yu
In Choi
Affiliation:
Kookmin University
Joon Y. Park
Affiliation:
Seoul National University
Byungchul Yu
Affiliation:
Donga University
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Abstract

This paper introduces tests for the null of cointegration in the presence of I(1) and I(2) variables. These tests use residuals from Park's (1992, Econometrica 60,119–143) canonical cointegrating regression (CCR) and the leads-and-lags regression of Saikkonen (1991, Econometric Theory 9,1–21) and Stock and Watson (1993, Econometrica 61, 783–820). Asymptotic theory for CCR in the presence of I(1) and I(2) variables is also introduced. The distributions of the cointegration tests are nonstandard, and hence their percentiles are tabulated by using simulation. Monte Carlo simulation results to study the finite sample performance of the CCR estimates and the cointegration tests are also reported.

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Type
Articles
Information
Econometric Theory , Volume 13 , Issue 6 , December 1997 , pp. 850 - 876
Copyright
Copyright © Cambridge University Press 1997

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