Cointegration <Back to Last Page>     <Full Glossary>

Definition of Cointegration: "An (n x 1) vector time series y_t is said to be cointegrated if each of the series taken individually is ... nonstationary with a unit root, while some linear combination of the series a'y is stationary ... for some nonzero (n x 1) vector a."

Hamilton uses the phrasing that y_t is cointegrated with a', and offers a couple of examples. One was that although consumption and income time series have unit roots, consumption tends to be a roughly constant proportion of income over the long term, so (ln income) minus (ln consumption) looks stationary. (Econterms)

Terms related to Cointegration:

• Stationary
• Unit root

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