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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

1989

Yale University

Co-integration

Articles 1 - 2 of 2

Full-Text Articles in Social and Behavioral Sciences

Testing For A Unit Root In The Presence Of Deterministic Trends, Peter C.B. Phillips, Peter Schmidt Oct 1989

Testing For A Unit Root In The Presence Of Deterministic Trends, Peter C.B. Phillips, Peter Schmidt

Cowles Foundation Discussion Papers

This paper provides a new unit root test based on an alternative parameterization which has previously been considered by Bhargava (1986). This parameterization allows for trend under both the null and the alternative, without introducing any parameters that are irrelevant under either. This is not so in the Dickey-Fuller parameterizations. The new test is extracted from the score or LM principle under the assumption that the errors are iid N(0, sigma squared (epsilon)), but our asymptotics hold under more general assumptions about the errors. Two forms of the test (a coefficient test and at t-test) are derived.


Estimating Long Run Economic Equilibria, Peter C.B. Phillips, Mico Loretan Oct 1989

Estimating Long Run Economic Equilibria, Peter C.B. Phillips, Mico Loretan

Cowles Foundation Discussion Papers

Our subject is econometric estimation and inference concerning long-run economic equilibria in models with stochastic trends. Our interest is focused on single equation specifications such as those employed in the Error Correction Model (ECM) methodology of David Hendry (1987, 1989 inter alia) and the semiparametric modified least squares method of Phillips and Hansen (1989). We start by reviewing the prescriptions for empirical time series research that are presently available. We argue that the diversity of choices is confusing to practitioners and obscures the fact that statistical theory is clear about optimal inference procedures. Part of the difficulty arises from the …