This paper stresses the restrictive nature of the standard unit root/cointegration assumptions and examines a more general type of time heterogeneity, which might characterize a number of economic variables, and which results in parameter time dependence and misleading statistical inference. We...

This paper investigates the effects of imposing invalid cointegration restrictions or ignoring valid ones on the estimation, testing and forecasting properties of the bivariate, first-order, vector autoregressive (VAR(1)) model. We first consider nearly cointegrated VARs, that is, stable systems...