Size and Power of the Error Correction Model Cointegration Test. A Bootstrap Approach.

The size and power of the ECM cointegration test are investigated by using the 'bootstrap critical values.' The purpose of this paper is to show the ability of the bootstrap technique to produce critical values which are much more accurate than the asymptotic ones. The properties of the test have been studied, using Monte Carlo methods, for three different data generating processes. As regards the size of the tests, the authors find that the ECM cointegration test together with the bootstrap critical values perform better than the ECM cointegration test based on the asymptotic critical values. While as regards the power of the tests, the results prove to be similar for the different versions. Copyright 1998 by Blackwell Publishing Ltd