Cointegration: Origins and significance for economists

Abstract

This paper provides a non‐mathematical introductory survey to cointegration, a technique becoming widely used in macroeconomic modelling. To give the paper a unifying theme the historical developments of the cointegration literature are followed as closely as possible. Throughout the paper, the significance of each econometric development to macroeconomic modelling is emphasised and an applied example is used to embellish the survey.

Notes

This paper is a revised version of a paper presented at the 1990 Summer Conference of the New Zealand Association of Economists. I wish to thank the conference participants, particularly Rob Trevor and Viv Hall, for their helpful comments. The paper has benefited from comments received from the editor and two anonymous referees of this journal. I also wish to thank my colleagues at the Reserve Bank, in particular Craig Beaumont, for useful comments on earlier drafts of the paper. However, neither they, nor the Reserve Bank, are in any way responsible for the contents of the paper.