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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What are the true normalized cointegration vectors in R (ca.jo, cajorls and VECM functions) and how to interpret them?

I'm struggling with understand the difference between (and why there is this difference) the normalized cointegration vectors provided by the ca.jo function and the ...
1 vote
26 views

Purchasing power parity and cointegrating vectors

I am testing for the existence of purchasing power parity (PPP) relationships using cointegration tests, among others, and I am a bit tempted to test whether or not my cointegrating vectors are equal ...
41 views

What should I do before an OLS regression and Johansen cointegration test with time series data?

I have to make a regression with real exports as the dependent and then an aggregated GDP income variable and the real effective exchange rate as independent variables. My variables are time series (...
39 views

Difference in Difference - how to choose the control group (difference with no clear trend, parallel series or cointegrated?)

I'd like to use difference in difference methodology to test the impact of a treatment. Being the formula of the regression: ...
• 101
33 views

Johansen Test Results: highest eigenvalues equal to 0, lower higher than 0

Suppose that we perfrom a Johansen test over three I(1) variables that give us these results through the maximum eigenvalues statistic: as you can see, we accept the null hypothesis in the first step,...
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In Panel Data models, could we apply the existing Unit Root Tests (i.e. IPS) to the residuals in order to test for Cointegration?

The Engle Granger approach suggests that we check the regression residuals stationarity with ADF test and if the residuals are stationary, even if not all other model variables are, we can say there ...
52 views

What was the paper that discussed the unit-root/spurious regression in economics before cointegration?

I attended guest lecture where the speaker said that one way how to make a career in economics is to just point that some methods are bad or do not work as intended. The speaker mentioned some paper, ...
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389 views

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 ...
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184 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 ...
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1 vote
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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 ...
290 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 ...
435 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 ...
1k 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
64 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!
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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 ...
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1 vote
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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, ...
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Aggregate production function, factor shares and cointegration

When estimating an aggregate production function you fit your data to a selected functional form of the production function, derive the parameters and inference from there. My question is, is there ...
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1 vote