We provide a methodology to disentangle the long-run relation between variables from their own dynamics. Macroeconomic and aggregate financial series have a high degree of inertia. If this persistence is not properly accounted for, spurious correlations will give rise to paradoxes. Our procedure...

Time series models have provided econometricians with a rich toolbox to choose from. Linear ARIMA models have been very influential and have enhanced our understanding of many empirical features of economics and finance. As with any scientific endeavour, data have emerged that show the need for...