I have a question regarding the concept of cointegration. Does the concept of
cointegration apply to any model? Or it only applies to OLS? For example, I fit
an autoregressive error model , AR(M)
y_t=x_t*�+v_t
v_t=-�_1*v_(t-1)-...-�_m*v_(t-m)+�_t
If the ADF tests prove that both dependent variable y and independent variable
x are stationary at I(1), and the residuals �_t are stationary at I(0), Can I
conclude y and x are cointegrated? The residuals �_t are the prediction errors
from the AR(M) model.
I checked the definition of cointegration, it looks like as long as the
residuals from OLS are I(0) and both x and y are I(1), then x and y are
cointegrated? Do I need to test stationary of the residuals from my AR(M) model
in order to prove that x and y are cointegrated?
You help is appreciated.
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