Omitted variables in cointegration analysis

Pashourtidou, Nicoletta (2003) Omitted variables in cointegration analysis , Southampton University of Southampton (Discussion Papers in Economics and Econometrics, 304).


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This paper investigates the effects of the omission of relevant variables from the statistical model on cointegration analysis, proposed by Johansen (1988, 1991). We show that underspecification of the statistical model leads to either failure in detecting cointegration or underestimation of the cointegrating rank. Although in the underspecified statistical model the estimator of the detected cointegrating vectors is shown to be consistent, this is not the case for the estimators of the adjustment coefficient matrix and the variance of the error term. The asymptotic analysis is supplemented by a Monte Carlo experiment and an empirical example.

Item Type: Monograph (Discussion Paper)
Keywords: cointegration, omitted variables, asymptotics, Monte Carlo
ePrint ID: 33205
Date :
Date Event
Date Deposited: 18 May 2006
Last Modified: 16 Apr 2017 22:17
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