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Spurious correlation of I(0) regressors in models with an I(1) dependent variable

Stewart, Chris (2006) Spurious correlation of I(0) regressors in models with an I(1) dependent variable. Economics Letters, 91(2), pp. 184-189. ISSN (print) 0165-1765

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Abstract

Hassler [Hassler, U., 1996. Spurious regressions when stationary regressors are included, Economics Letters, 50, 25–31] shows that t- and F-tests for zero restrictions on I(0) regressors in equations with an I(1) dependent variable do not diverge to infinity asymptotically. He concludes that there is no spurious significance for these regressors. Using Monte Carlo simulation we demonstrate that spurious correlation generally occurs in such regressions.

Item Type: Article
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences > School of Economics (until November 2012)
Depositing User: Chris Stewart
Date Deposited: 22 May 2013 11:56
Last Modified: 29 Nov 2013 12:26
URI: http://eprints.kingston.ac.uk/id/eprint/25471

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