Robust estimation for structural spurious regressions and a Hausman-type cointegration test |
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Authors: | Chi-Young Choi Ling Hu Masao Ogaki |
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Institution: | 1. Department of Economics, University of Texas at Arlington, USA;2. Department of Economics, Ohio State University, Columbus, OH 43210-1172, USA |
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Abstract: | This paper analyzes an approach to correcting spurious regressions involving unit-root nonstationary variables by generalized least squares (GLS) using asymptotic theory. This analysis leads to a new robust estimator and a new test for dynamic regressions. The robust estimator is consistent for structural parameters not just when the regression error is stationary but also when it is unit-root nonstationary under certain conditions. We also develop a Hausman-type test for the null hypothesis of cointegration for dynamic ordinary least squares (OLS) estimation. We demonstrate our estimation and testing methods in three applications: (i) long-run money demand in the U.S., (ii) output convergence among industrial and developing countries, and (iii) purchasing power parity (PPP) for traded and non-traded goods. |
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Keywords: | C10 C15 |
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