Are the Economies of Canada and the United States Integrated? Evidence from Cointegration Analysis
28 Pages Posted: 12 Oct 2014 Last revised: 27 Sep 2017
Date Written: September 26, 2017
In recognition of his contributions to the development of the method of cointegration analysis for analyzing nonstationary time series, late Sir Clive William John Granger (4 September 1934-27 May 2009) was awarded the Nobel Memorial Prize in Economic Sciences in 2003. Since then, this method has become a dominant paradigm in empirical economic research. However, this method is not without critics. This paper is one in a series to point out some inconsistent arguments used in the development of the method of cointegration analysis. To illustrate by example, we apply the method of time series cointegration analysis and present statistical evidence that supports the proposition that the economies of Canada and the United States are integrated. We conclude this paper by laying out a foundation to formally criticize the method of cointegration analysis in subsequent research.
Keywords: cointegration analysis, unit root, time series, econometric modeling, economic policy, policy analysis
JEL Classification: C22, C50, E60
Suggested Citation: Suggested Citation