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Size and Power of the Error Correction Model Cointegration Test. A Bootstrap Approach
Author(s) -
Mantalos Panagiotis,
Shukur Ghazi
Publication year - 1998
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00097
Subject(s) - cointegration , monte carlo method , econometrics , mathematics , statistics , power (physics) , test (biology) , statistical hypothesis testing , physics , thermodynamics , geology , paleontology
The size and power of the ECM cointegration test are investigated by using the ‘bootstrap critical values’. The purpose of this paper is to show the ability of the bootstrap technique to produce critical values which are much more accurate than the asymptotic ones. The properties of the test have been studied, using Monte Carlo methods, for three different data generating processes. As regards the size of the test, we find that the ECM cointegration test together with the bootstrap critical values perform better than the ECM cointegration test based on the asymptotic critical values. While as regards the power of the tests, the results prove to be similar for the different versions.