Low-Frequency Robust Cointegration Testing
Ulrich K. Müller
Princeton University - Department of Economics
Mark W. Watson
Princeton University - Woodrow Wilson School of Public and International Affairs; National Bureau of Economic Research (NBER)
NBER Working Paper No. w15292
Standard inference in cointegrating models is fragile because it relies on an assumption of an I(1) model for the common stochastic trends, which may not accurately describe the data's persistence. This paper discusses efficient low-frequency inference about cointegrating vectors that is robust to this potential misspecification. A simple test motivated by the analysis in Wright (2000) is developed and shown to be approximately optimal in the case of a single cointegrating vector.
Number of Pages in PDF File: 50working papers series
Date posted: August 31, 2009
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