Inference in Cointegrating Models: UK M1 Revisited.

Journal article

The paper addresses the practical determination of cointegration rank. This is difficult for many reasons: deterministic terms play a crucial role in limiting distributions, and systems may not be formulated to ensure similarity to nuisance parameters; finite-sample critical values may differ from asymptotic equivalents; dummy variables alter critical values, often greatly; multiple cointegration vectors must be identified to allow inference; the data may be 1(2) rather than 1(1), altering distributions; and conditioning must be done with care. These issues are illustrated by an empirical application of multivariate cointegration analysis to a small model of narrow money, prices, output and interest rates in the UK.

Authors: Doornik, J; Hendry, D; Nielsen, B

• Publisher: Blackwell Publishing
• Journal: Journal of Economic Surveys
• Volume: 12
• Issue: 5
• Pages: 533 - 572
• Publication date: 1998-01-01
• DOI: 10.1111/1467-6419.00067
• ISSN: 0950-0804
• Language: English