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ESTIMATION AND TESTING FOR COINTEGRATION WITH TRENDED VARIABLES: A Comparison of a Static and a Dynamic Regression Procedure

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  • Noswijk, H

Abstract

In this paper two estimation and testing procedures for cointegration are compared for variables with deterministic trends. The first procedure consists of static regression estimator and a residual unit root test; the second estimator and (Wald) test statistic are derived from a dynamic regression. The asymptotic properties are derived, and critical values for the Wald test are simulated. A Monte Carlo simulation study suggests that in small samples the performance of the two procedures critically depends on the parameters of the data generating process.

Suggested Citation

  • Noswijk, H, 1989. "ESTIMATION AND TESTING FOR COINTEGRATION WITH TRENDED VARIABLES: A Comparison of a Static and a Dynamic Regression Procedure," University of Amsterdam, Actuarial Science and Econometrics Archive 293141, University of Amsterdam, Faculty of Economics and Business.
    • Handle: RePEc:ags:amstas:293141
    DOI: 10.22004/ag.econ.293141
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    Research Methods/ Statistical Methods;

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