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A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration

Published online by Cambridge University Press:  11 February 2009

Yongcheol Shin
Yongcheol Shin
Affiliation:
University of Cambridge
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Abstract

This paper proposes a residual-based test of the null of cointegration using a structural single equation model. It is shown that the limiting distribution of the test statistic for cointegration can be made free of nuisance parameters when the cointegrating relation is efficiently estimated. The limiting distributions are given in terms of a mixture of a Brownian bridge and vector Brownian motion. It is also shown that this test is consistent. Critical values are given for standard, demeaned, and detrended cases. Combining results from our test for cointegration with results from the Phillips-Ouliaris test for no cointegration, we find that there is evidence of cointegration between real consumption and real disposable income over the postwar period.

Type
Articles
Information
Econometric Theory , Volume 10 , Issue 1 , March 1994 , pp. 91 - 115
Copyright
Copyright © Cambridge University Press 1994

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