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Testing for an irrelevant regressor in a simple cointegration analysis

Author

Listed:
  • Daniel Ventosa-santaulària

    (Universidad de Guanajuato)

Abstract

This paper investigates the asymptotic behavior of the t-ratio associated to an irrelevant variable in a three-variable cointegration analysis. It is proved that the t-ratio converges to a non-standard distribution suitable for statistical inference. Although the test-statistic is not pivotal when the innovations are serially correlated, Monte Carlo evidence suggests that the size distortion can be considerably mitigated by means of HAC standard errors.

Suggested Citation

  • Daniel Ventosa-santaulària, 2010. "Testing for an irrelevant regressor in a simple cointegration analysis," Economics Bulletin, AccessEcon, vol. 30(2), pages 1333-1345.
    • Handle: RePEc:ebl:ecbull:eb-09-00715
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P124.pdf
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    More about this item

    Keywords

    Irrelevant variables; cointegration; t-ratio; statistical inference;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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