Why Mos‌ t Published Results on Unit Root and Cointegration Are False

Description

Cointegration analysis for analyzing and modeling non-s‌ tationary economic time series variables, proposed by Engle and Granger (1987), has become a dominant paradigm in empirical economic research (Hendry 2004; Royal Swedish Academy of Science 2003). Critics, however, argue that a cointegration analysis produces results that are, at bes‌ t, useless and, at wors‌ t, dangerous (Moosa 2011, pp. 114). In this research, we will explain why and how the use of a cointegration analysis in economic research will lead to spurious findings and why any recommendations for public policy will likely be unsound, misleading and potentially harmful.