Time-varying cointegration with an application to the UK Great Ratios

We build on an estimation method which can accommodate time variation in a cointegrating relationship and present a test for cointegration under this setup. We apply our test procedure to the UK Great Ratios and find little evidence for cointegration when the parameters are assumed constant, but str...

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Bibliographic Details
Published in:Economics letters 2020-08, Vol.193, p.109213, Article 109213
Main Authors: Kapetanios, George, Millard, Stephen, Petrova, Katerina, Price, Simon
Format: Article
Language:English
Subjects:
Cointegration
Cointegration analysis
Economic growth
Estimating techniques
Great Ratios
Time variation
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Summary:We build on an estimation method which can accommodate time variation in a cointegrating relationship and present a test for cointegration under this setup. We apply our test procedure to the UK Great Ratios and find little evidence for cointegration when the parameters are assumed constant, but strong evidence when allowing them to drift slowly over time. •We propose a test for cointegrating relationships in the presence of time variation.•We apply our test to the UK Great Ratios.•We find strong evidence for time-varying cointegrating relationships in the UK Great Ratios.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2020.109213