Boswijk, H. and Doornik, J. (2005). Distribution approximations for cointegration tests with stationary exogenous regressors Journal of Applied Econometrics, 20(6):797--810.
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Affiliated author
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Publication year2005
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JournalJournal of Applied Econometrics
The distribution of a functional of two correlated vector-Brownian motions is approximated by a Gamma distribution. This functional represents the limiting distribution for cointegration tests with stationary exogenous regressors, but also for cointegration tests based on a non-Gaussian likelihood. The approximation is accurate, fast and easy to use in comparison with both tabulated critical values and simulated p-values. The proposed procedure is applied to a UK model investigating purchasing power parity.