# Questions tagged [co-integration]

Two or more non-stationary, integrated variables are cointegrated if there exists a linear combination of those variables which is integrated of a lower order, e.g. stationary.

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### Does I(1) imply a process is cointegrated with its lag?

My question is about the definition of cointegrated. $y_t =y_{t-1}+u_t$ $u_t =\eta_t +0.5\eta_{t-1}$ where $\eta_t\sim N(0,1)$ is i.i.d. white noise. I claim that $y_t$ and $y_{t-1}$ are cointegrated ...
113 views

### Should Prices (or Price Indices) be modelled with deterministic trend?

I always face a dilemma on whether to assume prices to have a time trend or not while modelling. It is also partly a statistics problem. Let me explain. Assume I have time series, $y_t$ of price of a ...
1 vote
79 views

### Cointegration in stock market between different market places

Hi guys im interested in cointegration in stock market between Brazil, USA, London, China, India, Argentina and Hong Kong. Since I want to compare each country’s index to the BR index, how do i do to ...
109 views

### Should one remove trend from time series before testing for cointegration?

Should one remove trend from time-series before testing for cointegration? I guess no, but I couldn't find any answers yet. Also is it necessary to remove trend before estimating a VAR model if the ...
142 views

### Difference-in-Difference (DID) Regression with Non-Stationary (but Cointegrated) Treatment and Control Groups

I would like to run a DID regression between two periods where each period spans multiple years. For example: Period 1: 1970Q1-1990Q4 Period 2: 1991Q1-2010Q4. My treatment and control variables are ...
42 views

### Cointegration but no Granger causality

Suppose I have two variables - $y_t$ and $x_t$ - which are cointegrated. I believe that (i) $y_t$ responds to deviations from the long-run equilibrium, (ii) the long-run elasticity of $y_t$ with ...
200 views

### Johansen test explanation

I am trying to understand the whole Johansen procedure via wikipedia and some other articles and I'm a noob in econometrics so there is a lot of notation and jargon that I think I am not familiar with....
1 vote
52 views

### Spurious regressions [closed]

If $\{ X_t \}$ is a $I(1)$ series and $\{ Y_t \}$ is a $I(0)$ series, would it cause "spurious regression" when regressing like $Y_i=\beta_0+\beta_1 X_i+u_i$? Thanks!
63 views

### If two variables are not cointegrated, can one still cause the other?

For part of a project, I wanted to see if electricity consumption causes GDP in Colorado. I initially intended to follow the approach of Mozumder and Marathe (2007), who use a VECM approach, but that ...
1 vote
23 views

### When only half of the independent variables are non stationary, does it make sense to run a cointegration test?

I have the following regression equation (panel data): $Y = f(X_1, X_2, X_3, X_4)$ After obtaining CIPS and CADF statistics, $X_1$ results to be stationary for both intercept and intercept + trend, ...