Abstract
This paper aims to extend the cointegration rank test to error correction models with exogenous stationary covariates. The distribution of the likelihood ratio statistic is a function of the canonical correlations between the equation errors with and without the covariates. The distribution approaches the chi-squared distribution as the stationary covariates lower the canonical correlations. This enables more powerful inference concerning the determination of the cointegration rank.
| Original language | English |
|---|---|
| Pages (from-to) | 339-385 |
| Number of pages | 47 |
| Journal | Journal of Econometrics |
| Volume | 85 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1998 Aug |
| Externally published | Yes |
Keywords
- Cointegration
- Error correction models
- Power
- Stationary covariates
ASJC Scopus subject areas
- Economics and Econometrics