IDEAS home Printed from https://ideas.repec.org/p/cte/wsrepe/10607.html
   My bibliography  Save this paper

ECM tests for cointegration in a single equation framework

Author

Listed:
  • Banerjee, Anindya
  • Mestre, Ricardo

Abstract

This paper proposes a new test for cointegration In a single-equation framework where the regressors are weakly exogenous for the parameters of interest. The test is denoted as ECM test and is based upon the OLS coefficient of the lagged dependent variable in an autoregressive-distributed lag model augmented with leads of the regressors. The limit distributions of the standardised coefficient and t-ratio versions of the ECM tests are obtained and critical values are provided. These limit distributions do not depend upon nuisance parameters but they depend on the number of regressors. Finally, we compare their power properties with those of other cointegration tests available in the literature and find under which circumstances the ECM tests have a better performance.

Suggested Citation

  • Banerjee, Anindya & Mestre, Ricardo, 1997. "ECM tests for cointegration in a single equation framework," DES - Working Papers. Statistics and Econometrics. WS 10607, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:10607
    as

    Download full text from publisher

    File URL: https://e-archivo.uc3m.es/rest/api/core/bitstreams/0d2bf3a9-9cf1-4710-97c4-95378ab59cf9/content
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100, Elsevier.
    2. Phillips, Peter C B, 1988. "Regression Theory for Near-Integrated Time Series," Econometrica, Econometric Society, vol. 56(5), pages 1021-1043, September.
    3. Kiviet, Jan F & Phillips, Garry D A, 1992. "Exact Similar Tests for Unit Roots and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 349-367, August.
    4. P. C. B. Phillips & S. N. Durlauf, 1986. "Multiple Time Series Regression with Integrated Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(4), pages 473-495.
    5. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    6. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    7. Peter C. B. Phillips & Mico Loretan, 1991. "Estimating Long-run Economic Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 407-436.
    8. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    9. Hendry, David F. & Ericsson, Neil R., 1991. "Modeling the demand for narrow money in the United Kingdom and the United States," European Economic Review, Elsevier, vol. 35(4), pages 833-881, May.
    10. Hansen, B.E., 1990. "A Powerful, Simple Test For Cointegration Using Cochrane- Orcutt," RCER Working Papers 230, University of Rochester - Center for Economic Research (RCER).
    11. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    12. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-277, August.
    13. Hunter, J., 1990. "Cointegrating exogeneity," Economics Letters, Elsevier, vol. 34(1), pages 33-35, September.
    14. 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.
    15. Hansen, Bruce E., 1995. "Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power," Econometric Theory, Cambridge University Press, vol. 11(5), pages 1148-1171, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arranz, Miguel A., 1998. "Detrending procedures and cointegration testing: ECM tests under structural breaks," DES - Working Papers. Statistics and Econometrics. WS 4551, Universidad Carlos III de Madrid. Departamento de Estadística.
    2. Hondroyiannis, George & Papapetrou, Evangelia, 1998. "Temporal causality and the inflation-productivity relationship: Evidence from eight low inflation OECD countries," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 117-135.
    3. Pradeep Agrawal, 2001. "The relation between savings and growth: cointegration and causality evidence from Asia," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 499-513.
    4. Charalambos Pattichis, 1999. "Price and income elasticities of disaggregated import demand: results from UECMs and an application," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1061-1071.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
    2. Norah Al-Ballaa, 2005. "Test for cointegration based on two-stage least squares," Journal of Applied Statistics, Taylor & Francis Journals, vol. 32(7), pages 707-713.
    3. Haug, Alfred A., 1996. "Tests for cointegration a Monte Carlo comparison," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 89-115.
    4. Ericsson, Neil R., 1992. "Cointegration, exogeneity, and policy analysis: An overview," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 251-280, June.
    5. Campos, Julia & Ericsson, Neil R. & Hendry, David F., 1996. "Cointegration tests in the presence of structural breaks," Journal of Econometrics, Elsevier, vol. 70(1), pages 187-220, January.
    6. Jing Li & Junsoo Lee, 2010. "ADL tests for threshold cointegration," Journal of Time Series Analysis, Wiley Blackwell, vol. 31(4), pages 241-254, July.
    7. Carone, Giuseppe, 1996. "Modeling the U.S. demand for imports through cointegration and error correction," Journal of Policy Modeling, Elsevier, vol. 18(1), pages 1-48, February.
    8. Sunil Sharma & Neil R. Ericsson, 1998. "Broad money demand and financial liberalization in Greece," Empirical Economics, Springer, vol. 23(3), pages 417-436.
    9. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    10. Zivot, Eric, 2000. "The Power Of Single Equation Tests For Cointegration When The Cointegrating Vector Is Prespecified," Econometric Theory, Cambridge University Press, vol. 16(3), pages 407-439, June.
    11. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
    12. Gabriel Rodriguez & Pierre Perron, 2013. "Single-equation tests for Cointegration with GLS Detrended Data," Boston University - Department of Economics - Working Papers Series 2013-016, Boston University - Department of Economics.
    13. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    14. Boswijk, H. Peter, 1995. "Efficient inference on cointegration parameters in structural error correction models," Journal of Econometrics, Elsevier, vol. 69(1), pages 133-158, September.
    15. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    16. Ericsson, Neil R & Hendry, David F & Mizon, Grayham E, 1998. "Exogeneity, Cointegration, and Economic Policy Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 370-387, October.
    17. G. Everaert, 2007. "Estimating Long-Run Relationships between Observed Integrated Variables by Unobserved Component Methods," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/452, Ghent University, Faculty of Economics and Business Administration.
    18. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521547871, January.
    19. Singh, Tarlok, 2010. "Does domestic saving cause economic growth? A time-series evidence from India," Journal of Policy Modeling, Elsevier, vol. 32(2), pages 231-253, March.
    20. Caporale, Guglielmo Maria & Williams, Geoffrey, 2002. "Long-term nominal interest rates and domestic fundamentals," Review of Financial Economics, Elsevier, vol. 11(2), pages 119-130.

    More about this item

    Keywords

    Cointegration tests;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cte:wsrepe:10607. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Poveda (email available below). General contact details of provider: http://portal.uc3m.es/portal/page/portal/dpto_estadistica .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.