Cointegration Analysis with Econometrics Toolbox

Cointegration is a relationship among macroeconomic time series that follow a shared stochastic trend. Identifying cointegration, distinguishing it from common notions of deterministic trend, and accurately modeling it are essential for meaningful forecasting. Econometrics Toolbox™ has a versatile collection of tools for cointegration testing and parameter estimation of the associated vector error-correction models. In this webinar, basic concepts of cointegration are reviewed in the context of real economic data. Both the Engle-Granger and Johansen frameworks for cointegration analysis are discussed, using hypothesis testing functions from the toolbox. Cointegrating relationships, when identified, are estimated and plotted. Within the Johansen framework, various null hypotheses for the cointegrating relationship are compared, together with corresponding methods for estimating model parameters. Finally, constraints on the cointegrating relationship and their effects on model estimation are considered as an extension of the standard Johansen framework, with relevant modeling strategies demonstrated. Download the code from the video: https://bit.ly/3NRTLxP Download the demo notes: https://bit.ly/44Be0WB View slides: https://bit.ly/42x6EBm Cointegration Webinar Q & A: https://bit.ly/3VI86Pj 0:00 Introduction 0:14 Cointegrated Data 3:05 Terminology and Definitions 5:13 Data and Visualization in Matlab 6:09 Pretest for the Order of Integration 14:36 Engle-Granger Test for Cointegration 20:07 Cointegrating Relations 21:24 The Cointegrated VAR Model 27:22 Limitations of the Engle-Granger Test 30:06 Johansen Framework for Cointegration Testing 35:20 VEC Model Estimation 38:25 Testing Cointegration Constraints 43:12 Conclusion