An Alternative Approach to the Asymptotic Theory of Spurious Regression, Cointegration, and Near Cointegration

An alternative approach is taken to the asymptotic theory of cointegration. The present approach gives a different expression for the limiting distributions of statistics associated with cointegration, which enables us to compute accurately the distribution functions. Alternative interpretations of cointegration are given and a notion of near cointegration is introduced. We then devise tests which take cointegration as the null and discuss the limiting local power under the alternative of near cointegration.