Testing for a Long Run Relationship between Trend and Difference Stationary Series

  • Peter Kugler
  • Peter Schwendener
Conference paper


The theory of cointegration and error correction models developed in the last couple of years by, among others, Engle and Granger (1987), as well as Johansen (1988) proved very useful for testing and estimating long-run relationships between difference stationary [I(1)] series. However, there is an increasing literature expressing the view that the autocorrelation of macroeconomic time series could be produced either by trend or difference stationary models [e.g. Christiano Eichenbaum (1990) and the evidence presented by stock (1991)]. Of course, the idea of co integration cannot be applied to trend stationary series, but there is the related idea of codependence suggested by Gourieroux and PeaucelIe (1989) which is designed for testing a long run relationship between stationary series. This paper uses this approach in a VAR framework which can be applied to trend and difference stationary variables.


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Copyright information

© Springer-Verlag Berlin Heidelberg 1993

Authors and Affiliations

  • Peter Kugler
    • 1
  • Peter Schwendener
    • 1
  1. 1.Abt. ÖkonometrieUniversität BernBernSwitzerland

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