Testing of Fractional Cointegration in Macroeconomic Time Series

13 Pages Posted: 12 Jul 2003

See all articles by Luis A. Gil-Alana

Luis A. Gil-Alana

University of Navarra - Department of Economics

Abstract

We propose in this article a two-step testing procedure of fractional cointegration in macroeconomic time series. It is based on Robinson's (Journal of the American Statistical Association, Vol. 89, p. 1420) univariate tests and is similar in spirit to the one proposed by Engle & Granger (Econometrica, Vol. 55, p. 251), testing initially the order of integration of the individual series and then, testing the degree of integration of the residuals from the cointegrating relationship. Finite-sample critical values of the new tests are computed and Monte Carlo experiments are conducted to examine the size and the power properties of the tests in finite samples. An empirical application, using the same datasets as in Engle & Granger (Econometrica, Vol. 55, p. 251) and Campbell & Shiller (Journal of Political Economy, Vol. 95, p. 1062), is also carried out at the end of the article.

Suggested Citation

Gil-Alana, Luis A., Testing of Fractional Cointegration in Macroeconomic Time Series. Available at SSRN: https://ssrn.com/abstract=423643

Luis A. Gil-Alana (Contact Author)

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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