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On The Size And Power Of System Tests For Cointegration

Author

Listed:
  • Ronald Bewley
  • Minxian Yang

Abstract

System tests for cointegration proposed by Stock and Watson (1988), Johansen (1988), and Bewley and Yang (1995) are compared using Monte Carlo experiments that include overspecification of the lag length and data-generating processes with moving average disturbances. Both AIC and SIC are used to select the lag length of the approximating vector autoregressions. The three tests considered are found to have very different characteristics, and each dominates in some portion of the parameter space. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

Suggested Citation

  • Ronald Bewley & Minxian Yang, 1998. "On The Size And Power Of System Tests For Cointegration," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 675-679, November.
    • Handle: RePEc:tpr:restat:v:80:y:1998:i:4:p:675-679
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    Cited by:

    1. Carlos Enrique Carrasco Gutiérrez & Reinaldo Castro Souza & Osmani Teixeira de Carvalho Guillén, 2007. "Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features," Working Papers Series 139, Central Bank of Brazil, Research Department.
    2. Österholm, Pär, 2003. "Testing for Cointegration in Misspecified Systems –A Monte Carlo Study of Size Distortions," Working Paper Series 2003:21, Uppsala University, Department of Economics.
    3. Par Osterholm, 2004. "Size properties of cointegration tests in misspecified systems," Applied Economics Letters, Taylor & Francis Journals, vol. 11(15), pages 919-924.
    4. Pesavento, Elena, 2004. "Analytical evaluation of the power of tests for the absence of cointegration," Journal of Econometrics, Elsevier, vol. 122(2), pages 349-384, October.
    5. Morten {O}rregaard Nielsen & Won-Ki Seo & Dakyung Seong, 2023. "Inference on common trends in functional time series," Papers 2312.00590, arXiv.org, revised May 2024.
    6. Anthony De Francesco, 1999. "The relationship between unemployment and vacancies in Australia," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 641-652.
    7. Henryk Gurgul & Łukasz Lach, 2010. "International trade and economic growth in the Polish economy," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 20(3-4), pages 5-29.
    8. Wagner, Martin, 1999. "VAR Cointegration in VARMA Models," Economics Series 65, Institute for Advanced Studies.
    9. Peter Winker & Dietmar Maringer, 2004. "Optimal Lag Structure Selection in VEC-Models," Contributions to Economic Analysis, in: New Directions in Macromodelling, pages 213-234, Emerald Group Publishing Limited.
    10. Nasim Shah Shirazi & Turkhan Ali Abdul Manap, 2005. "Export-Led Growth Hypothesis: Further Econometric Evidence From South Asia," The Developing Economies, Institute of Developing Economies, vol. 43(4), pages 472-488, December.
    11. Jordan Shan & Fiona Sun, 1998. "On the export-led growth hypothesis for the little dragons: An empirical reinvestigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(4), pages 353-371, December.
    12. Bewley, Ronald, 2002. "Forecast accuracy, coefficient bias and Bayesian vector autoregressions," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 59(1), pages 163-169.
    13. Nasim Shah Shirazi & Turkhan Ali Abdul Manap, 2004. "Exports and Economic Growth Nexus: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 563-581.

    More about this item

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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