1/1
0/0

Testing for cointegration using the Johansen approach: are we using the correct critical values?

preprint
posted on 05.06.2007 by Paul Turner
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.

History

School

  • Business and Economics

Department

  • Economics

Publication date

2007

Notes

This is a working paper - it is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_12.html.

ISSN

1750-4171

Language

en

Exports

Logo branding

Keyword(s)

Exports