Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data

This book provides a wide-ranging account of the literature on co-integration and the modelling of integrated processes (those which accumulate the effects of past shocks). Data series which display integrated behaviour are common in economics, although techniques appropriate to analysing such data are of recent origin and there are few existing expositions of the literature. This book focuses on the exploration of relationships among integrated data series and the exploitation of these relationships in dynamic econometric modelling. The concepts of co-integration and error-correction models are fundamental components of the modelling strategy.

This area of time-series econometrics has grown in importance over the past decade and is of interest to econometric theorists and applied econometricians alike. By explaining the important concepts informally, but also presenting them formally, the book bridges the gap between purely descriptive and purely theoretical accounts of the literature. The asymptotic theory of integrated processes is described and the tools provided by this theory are used to develop the distributions of estimators and test statistics. Practical modelling advice, and the use of techniques for systems estimation, are also emphasized.

A knowledge of econometrics, statistics, and matrix algebra at the level of a final-year undergraduate or first-year undergraduate course in econometrics is sufficient for most of the book. Other mathematical tools are described as they occur.

Readership: Professional and applied econometricians, graduate students of econometrics.

Anindya Banerjee, Tutor in Economics and Barnett Fellow, Wadham College, Oxford, Juan J. Dolado, Bank of Spain, Madrid, John W. Galbraith, Assistant Professor, Department of Economics, McGill University, and David Hendry, Professor of Economics, Nuffield College, Oxford

"`Very complete and exhaustive ... up-to-date presentation and theories ... clear examples and useful statistical tables.' Mr Tavera, Faculte de Sciences Economiques"

"`Fills a gap in the market - a readable text which provides a comprehensive coverage of recent research in this very important area.' Dr C.O. Alexander, University of Sussex"

"A very readable survey of many of the important contributions to this theoretical literature ... it is clear that unit roots, cointegration, and Wiener process theory are going to play an important role in the continuing debate. This book provides a valuable resource for all researchers interested in these topics." - Economic Journal

"This landmark in the history of econometrics is recommended to those who are more than superficially interested in the subject, including all those teaching the subject ... there is no competitor for this book." - De Economist