Have Your Cake and Eat It Too? Cointegration and Dynamic Inference from Autoregressive Distributed Lag Models
Abstract:
Although recent articles have stressed the importance of testing for unit roots and cointegration in time-series analysis, practitioners have been left without a straightforward procedure to implement this advice. I propose using the autoregressive distributed lag model and bounds cointegration test as an approach to dealingwith some of themost commonly encountered issues in time-series analysis. Through Monte Carlo experiments, I show that this procedure performs better than existing cointegration tests under a variety of situations. I illustrate how to implement this strategy with two step-bystep replication examples. To further aid users, I have designed software programs in order to test and dynamically model the results from this approach.