Optimal estimation of cointegrated systems with irrelevant instruments

@inproceedings{Phillips2006OptimalEO,
  title={Optimal estimation of cointegrated systems with irrelevant instruments},
  author={Peter C. B. Phillips},
  year={2006}
}
It has been know since Phillips and Hansen (1990) that cointegrated systems can be consistently estimated using stochastic trend instruments that are independent of the system variables. A similar phenomenon occurs with deterministically trending instruments. The present work shows that such “irrelevant” deterministic trend instruments may be systematically used to produce asymptotically efficient estimates of a cointegrated system. The approach is convenient in practice, involves only linear… CONTINUE READING

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