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Abstract Data spanning long time periods, such as that over 1860–2012 for the UK, seem likely to have substantial errors of measurement that may even be integrated of order one, but which are probably cointegrated for cognate variables. We analyze and simulate the impacts of such measurement errors on parameter estimates and tests in a bivariate cointegrated system with trends and location shifts which reflect the many major turbulent events that have occurred historically. When trends or shifts therein are large, cointegration analysis is not much affected by such measurement errors, leading to conventional stationary attenuation biases dependent on the measurement-error variance, unlike the outcome when there are no offsetting shifts or trends.

Original publication

DOI

10.9999/9999/dummy/143

Type

Working paper

Publication Date

17/01/2017

Volume

dummy/143

Keywords

Integrated Measurement Errors, Location Shifts, Long-run Data, Cointegration