COINTEGRATION AND UNIT ROOTS

Unit Roots and Cointegration in Panels∗

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T ), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might...

Handout on Unit Roots , Spurious Regressions and Cointegration

A time series is a random walk if 1 t t t y y u    where t u is iid. A time series is a martingale if 1 1 ( ) t t t E y y    . A time series is a martingale difference sequence if 1( ) 0 t t E y   . A time series is (weakly) stationary if it’s first two moments exist and do not change over time. A time series is invertible if it can be written as an autoregression. A time series is I(0)...

Unit Roots, Cointegration and Pre-Testing in VAR Models∗

This chapter investigates the robustness of impulse response estimators to near unit roots and near cointegration in VAR models. We compare estimators based on VAR specifications determined by pre-tests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be ...

Unit Root and Cointegration Tests

Jörg Breitung and M. Hashem Pesaran Unit Roots and Cointegration in Panels

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T ), and the cross section dimension (N) are relatively large. It distinguishes between the …rst generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might ...