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Cointegration analysis and the choice of lag length

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  • Jamie Emerson

Abstract

This article investigates the effects of the choice of lag length on the estimation of long run cointegration relationships using the Johansen estimation procedure. This issue is of particular interest to applied researchers using time series data, see for example Awokuse (2005), Bacchiocchi et al. (2005), Gallegati (2005), Gomes and Paz (2005), Hasan (2005) and Pieroni and Ricciarelli (2005), among many others. An empirical example is used to demonstrate some of the issues that applied researchers face when they wish to use cointegration analysis. First, the number of lags to include in the model must be determined. However, different lag length selection criteria often lead to a different conclusion regarding the optimal lag order that should be used. Second, as demonstrated in this article, the choice of lag length can drastically affect the results of the cointegration analysis.

Suggested Citation

  • Jamie Emerson, 2007. "Cointegration analysis and the choice of lag length," Applied Economics Letters, Taylor & Francis Journals, vol. 14(12), pages 881-885.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:12:p:881-885
    DOI: 10.1080/13504850600689956
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    1. repec:ags:aaea22:335749 is not listed on IDEAS
    2. Nygaard, Rune & Roll, Kristin H., 2024. "Cross-hedging wild salmon prices," Journal of Commodity Markets, Elsevier, vol. 33(C).
    3. Dao, Phong B. & Barszcz, Tomasz & Staszewski, Wieslaw J., 2024. "Anomaly detection of wind turbines based on stationarity analysis of SCADA data," Renewable Energy, Elsevier, vol. 232(C).
    4. El Benni, Nadja & Finger, Robert & Hediger, Werner, 2014. "Transmission of beef and veal prices in different marketing channels," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182696, European Association of Agricultural Economists.
    5. Marcio Genovevo da Costa & Nils Donner, 2016. "Cointegration between Equity- and Agricultural Markets: Implications for Portfolio Diversification," Journal of Management and Sustainability, Canadian Center of Science and Education, vol. 6(1), pages 24-44, March.
    6. Takashi Oga, 2021. "Intertemporal Cointegration Model: A New Approach to the Lead–Lag Relationship Between Cointegrated Time Series," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 27-53, April.

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