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Explaining Cointegration Analysis: Part 1
Abstract
'Classical' econometric theory assumes that observed data come from a stationary process, where means and variances are constant over time. Graphs of economic time series, and the historical record of economic forecasting, reveal the invalidity of such an assumption. Consequently, we discuss the importance of stationarity for empirical modeling and inference; describe the effects of incorrectly assuming stationarity; explain the basic concepts ofnon -stationarity; note some sources of non-stationarity; formulate a class of non -stationary processes (autoregressions with unit roots) that seem empirically relevant for analyzing economic time series; and show when an analysis can be transformed by means of differencing and cointegrating combinations so stationarity becomes a reasonable assumption. We then describe how to test for unit roots and cointegration. Monte Carlo simulations and empirical examples illustrate the analysis.
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Cites
Co-integration and error correction: representation, estimation and testing
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STATISTICAL ANALYSIS OF COINTEGRATION VECTORS
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Self-citationEstimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models
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The Role of Energy in Economic Growth
Stern, D. I. (2011) · Annals of the New York Academy of Sciences · doi:10.1111/j.1749-6632.2010.05921.x · Cited by 617
Causal relationship between energy consumption and GDP revisited: the case of Korea 1970–1999
Oh, W., & Lee, K. (2004) · Energy Economics · doi:10.1016/s0140-9883(03)00030-6 · Cited by 543
Residential electricity demand in Taiwan
Holtedahl, P., & Joutz, F. L. (2004) · Energy Economics · doi:10.1016/j.eneco.2003.11.001 · Cited by 384
Boker, S. M., Rotondo, J. L., Xu, M., & King, K. (2002) · Psychological Methods · doi:10.1037//1082-989x.7.3.338 · Cited by 360
Metadata
- Authors
- Hendry, D. F., & Juselius, K.
- Venue
- The Energy Journal
- Publisher
- SAGE Publications
- Published
- 2000-01
- Volume
- 21
- Issue
- 1
- Pages
- 1-42
- ISSN
- 0195-6574 (ISSN-L)
- 1944-9089
- OpenAlex
- W4239149204
- Cited by
- 303
- References
- 41
- FWCI
- 13.20
- Type
- journal article
- Language
- en
- Open access
- closed
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