The Analysis of Nonstationary Time Series Using Regression, Correlation and Cointegration

Contemporary Economics, Vol. 6, No. 2, pp. 40-57, 2012

18 Pages Posted: 25 Nov 2012

See all articles by Soren Johansen

Soren Johansen

University of Copenhagen - Department of Economics; Aarhus University - CREATES

Date Written: 2012

Abstract

There are simple well-known conditions for the validity of regression and correlation as statistical tools. We analyse by examples the effect of nonstationarity on inference using these methods and compare them to model based inference using the cointegrated vector autoregressive model. Finally we analyse some monthly data from US on interest rates as an illustration of the methods.

Keywords: regression, correlation, cointegration, model based inference, likelihood inference

JEL Classification: C32

Suggested Citation

Johansen, Soren, The Analysis of Nonstationary Time Series Using Regression, Correlation and Cointegration (2012). Contemporary Economics, Vol. 6, No. 2, pp. 40-57, 2012 , Available at SSRN: https://ssrn.com/abstract=2179946

Soren Johansen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000
Denmark

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