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Lecture 6
Contents
Time series analysis
Stationarity
What it is and what it is for
Cointegration
(Weak) Stationarity
Random walk
Spurious Regression
Dickey-Fuller Test
DF test- Stata
Cointegration
When we have an I(0) error term, with tw
o I(1) variables, in effect the drift proces
s in the I(1) variables have cancelled eac
h other out to produce an error term wit
h no drift.
If there is evidence of cointegration bet
ween X and Y, we say that there is a lon
g-run equilibrium relationship betwee
n X and Y
Cointegration - Stata