Turner, Paul
Testing for cointegration using the Johansen approach: are we using the correct critical values?
This paper presents Monte Carlo simulations for the Johansen cointegration test
which indicate that the critical values applied in a number of econometrics software
packages are inappropriate. This is due to a confusion in the specification of the
deterministic terms included in the VECM between the cases considered by
Osterwald-Lenum (1992) and Pesaran, Shin and Smith (2000). The result is a
tendency to reject the null of no cointegration too often. However, a simple
adjustment of the critical values is enough to deal with the problem.
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2007-06-05
https://repository.lboro.ac.uk/articles/preprint/Testing_for_cointegration_using_the_Johansen_approach_are_we_using_the_correct_critical_values_/9492902