Low-Frequency Robust Cointegration Testing

50 Pages Posted: 31 Aug 2009 Last revised: 15 Apr 2022

See all articles by Ulrich K. Müller

Ulrich K. Müller

Princeton University - Department of Economics

Mark W. Watson

Princeton University - Princeton School of Public and International Affairs; National Bureau of Economic Research (NBER)

Date Written: August 2009

Abstract

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.

Suggested Citation

Müller, Ulrich K. and Watson, Mark W., Low-Frequency Robust Cointegration Testing (August 2009). NBER Working Paper No. w15292, Available at SSRN: https://ssrn.com/abstract=1463885

Ulrich K. Müller

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States
609-258-3216 (Phone)
609-258-4026 (Fax)

HOME PAGE: http://www.princeton.edu/~umueller

Mark W. Watson (Contact Author)

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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