Economics, Econometrics and Finance
4 years ago

Linear trends in regressors bias cointegration tests, leading to inaccurate results.

Publications of Darmstadt Technical University, Institute for Business Studies (BWL)
The Effects of linear time trends on conintegration testing in single equations
Uwe Hassler

Paper Summary

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The article discusses how linear trends in data can affect tests for relationships between variables. When at least one variable in a regression has a linear trend, the tests can wrongly suggest a connection more often. The researchers explain the correct way to account for this issue, providing easy-to-use critical values for accurate testing.