On the Definitions of (Co-) Integration

Journal of Time Series Analysis, Vol. 20, pp. 129-137, 1999

12 Pages Posted: 15 Jan 2012

See all articles by Karim M. Abadir

Karim M. Abadir

Imperial College Business School

A. M. Robert Taylor

University of Birmingham - Department of Economics

Date Written: 1999

Abstract

Two problems exist in testing for (co-)integration. One is that current definitions of fractional integration in the time-domain can be incomplete. The other is that disregarding fractional orders of integration can cause incorrectly-sized inference about cointegration. This paper completes the time-domain definition of fractional integration, and defines cointegration in a general setting. As a by-product of the latter, testing for cointegration in models without a pre-specified functional form is shown to avoid a common inferential problem. Finally, we analyse the effects of using incomplete definitions of integration and/or cointegration. For the latter, incomplete I(1)-null procedures make cointegration seem more likely than it actually is, while incomplete I(0)-null procedures reject cointegration too often.

Suggested Citation

Abadir, Karim M. and Taylor, A. M. Robert, On the Definitions of (Co-) Integration (1999). Journal of Time Series Analysis, Vol. 20, pp. 129-137, 1999. Available at SSRN: https://ssrn.com/abstract=1985483

Karim M. Abadir (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://www3.imperial.ac.uk/portal/page?_pageid=61,629646&_dad=portallive&_schema=PORTALLIVE

A. M. Robert Taylor

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

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