UNIT ROOT AND COINTEGRATION TESTING: GUEST EDITORS' INTRODUCTION

Abstract

By pointing out the spurious regression problem, Granger and Newbold (1974) have shown the importance of stochastic trends in time series data in the context of linear regression models. At the time, removing trends by differencing was already common practice in univariate time series modeling as part of the Box–Jenkins approach (Box and Jenkins, 1976). These new developments, however, emphasized the importance of autoregressive (AR) unit roots and motivated the development of statistical procedures for their detection. Dickey and Fuller (1979) and Fuller (1976) were pioneers in developing tests for unit roots that became widely used. The foundation of asymptotic theory for regressions involving stochastic trends was led by Phillips (1986, 1987) with the introduction of the functional limit theory, weak convergence methods, convergence to stochastic integrals, nonparametric unit root testing, and continuous record asymptotics. Phillips and Durlauf (1986) extended some of these results to the multivariate setting by presenting the multivariate invariance principles and the asymptotic theory of multivariate nonstationary and cointegrating regressions. These contributions provided the asymptotic tools that have served as the basis for most of the limit results derived in the context of unit root nonstationarity, and they have stimulated extensive subsequent research.We are grateful to Peter Phillips for proposing a special issue of Econometric Theory for papers from our conference Unit Root and Cointegration Testing. We thank all participants of the conference who contributed their papers to this special issue. We are also very grateful to those colleagues who agreed to serve as referees for the papers. They not only provided generous help through comments but also respected our rather tight deadlines. We are grateful to all those who helped us to complete the special issue unusually fast. To protect their identities, we do not list them here. They will be included in the general list of referees for Econometric Theory. Our conference would not have been possible without the generous financial support of a number of sponsors. We are grateful to the Bank of Portugal, to the Portuguese Science Foundation (FCT), to the Luso-American Foundation for Development (FLAD), and to the Journal of Applied Econometrics for their financial support.