Chapter

Regression With Integrated Variables

Anindya Banerjee, Juan J. Dolado, John W. Galbraith and David F. Hendry

in Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data

Published in print May 1993 | ISBN: 9780198288107
Published online November 2003 | e-ISBN: 9780191595899 | DOI: http://dx.doi.org/10.1093/0198288107.003.0006

Series: Advanced Texts in Econometrics

 Regression With Integrated Variables

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The chapter demonstrates the special problems with inference that arise, for example, in orthogonality tests for rational expectations, from the presence of integrated variables. Using results from Sims, Stock and Watson (1990), we show how a proper consideration of the deterministics, the orders of integration of the variables, and dynamic specifications that take into account any co‐integrating relationships among the variables, enables the use of many of the standard distributional results to be restored. Our analysis is illustrated by a number of informative examples.

Keywords: co‐integration; deterministics; dynamic regressions; integrated variables unbalanced regressions; orders of integration; orthogonality tests; rational expectations

Chapter.  19211 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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