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Daniel Ventosa-santaulària
''Testing for an irrelevant regressor in a simple cointegration analysis''
( 2010, Vol. 30 No.2 )
This paper investigates the asymptotic behavior of the t-ratio associated to an irrelevant variable in a three-variable cointegration analysis. It is proved that the t-ratio converges to a non-standard distribution suitable for statistical inference. Although the test-statistic is not pivotal when the innovations are serially correlated, Monte Carlo evidence suggests that the size distortion can be considerably mitigated by means of HAC standard errors.
Keywords: Irrelevant variables, cointegration, t-ratio, statistical inference
JEL: C1 - Econometric and Statistical Methods: General
C3 - Time-Series Models
Manuscript Received : Nov 19 2009 Manuscript Accepted : May 12 2010

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