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
Official URL: http://dx.doi.org/10.1016/j.econlet.2005.11.014
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.
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