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Identifier to cite or link to this item: https://hdl.handle.net/10086/13581

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Title
Test for the null hypothesis of cointegration with reduced size distortion
Creator
Creator Name
Kurozumi, Eiji Kurozumi, Eiji
黒住, 英司 黒住, 英司
クロズミ, エイジ クロズミ, エイジ
Affiliation
Affiliation Name
Hitotsubashi University
Creator Name
Arai, Yoichi Arai, Yoichi
アライ, ヨウイチ アライ, ヨウイチ
Affiliation
Affiliation Name
University of Tokyo
Editor
Contributor Name
社会科学における統計分析拠点構築 = Research Unit for Statistical Analysis in Social Sciences
Key Word
Cointegration
locally best test
point optimal test
JEL
C12
C22
Abstract
This paper considers a single equation cointegrating model and proposes the locally best invariant and unbiased (LBIU) test for the null hypothesis of cointegration. We derive the asymptotic local power functions and compare them with the standard residualbased test, and we show that the LBIU test is more powerful in a wide range of local alternatives. Then, we conduct a Monte Carlo simulation to investigate the finite sample properties of the tests and show that the LBIU test outperforms the residual-based test in terms of both size and power. The advantage of the LBIU test is particularly patent when the error is highly autocorrelated. Further, we point out that finite sample performance of existing tests is largely affected by the initial value condition while our tests are immune to it. We propose a simple transformation of data that resolves the problem in the existing tests.
Description
September, 2006
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2006-11
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Hi-Stat Discussion paper series, No. 190
Sponsorship
21世紀COEプログラム = 21st-Century COE Program
Appears in Collections
Hi-Stat Discussion paper series
URL
https://hdl.handle.net/10086/13581