The role of the constant and linear terms in cointegration analysis of nonstationary variables
- 1 January 1994
- journal article
- research article
- Published by Informa UK Limited in Econometric Reviews
- Vol. 13 (2), 205-229
- https://doi.org/10.1080/07474939408800284
Abstract
The autoregressive model for cointegrated variables is analyzed with respect to the role of the constant and linear terms. Various models for 1(1) variables defined by restrictions on the deterministic terms are discussed, and it is shown that statistical inference can be performed by reduced rank regression. The asymptotic distributions of the test statistics and estimators are found. A similar analysis is given for models for 1(2) variables with a constant term.Keywords
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