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Spurious rejections by cointegration tests induced by structural breaks

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  • Stephen Leybourne
  • Paul Newbold

Abstract

The effects on three cointegration tests are examined when the series analysed are independent integrated processes, each with a structural break. Although there are differences in detail among the tests, the results indicate in all cases that, when structural breaks are neglected in the analysis, spurious rejections, indicating the presence of cointegration, can occur.

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  • Stephen Leybourne & Paul Newbold, 2003. "Spurious rejections by cointegration tests induced by structural breaks," Applied Economics, Taylor & Francis Journals, vol. 35(9), pages 1117-1121.
    • Handle: RePEc:taf:applec:v:35:y:2003:i:9:p:1117-1121
    DOI: 10.1080/0203684032000082068
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    References listed on IDEAS

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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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    5. Stephen J. Leybourne And Paul Newbold, 2000. "Behaviour of the standard and symmetric Dickey-Fuller-type tests when there is a break under the null hypothesis," Econometrics Journal, Royal Economic Society, vol. 3(1), pages 1-15.
    6. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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    10. Leybourne, Stephen J. & C. Mills, Terence & Newbold, Paul, 1998. "Spurious rejections by Dickey-Fuller tests in the presence of a break under the null," Journal of Econometrics, Elsevier, vol. 87(1), pages 191-203, August.
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