Explain the concepts of non-stationarity and cointegration, and how are they connected. Illustrate how one can test for cointegration using the two-step Engle and Granger approach.
Financial Econometrics QUESTION 1. Conduct all your statistical tests at the 5% level for this question. You are given the quarterly data of U.K. Consumer Price Index (CPI) over the period 1960Q1 to 2019Q2. The data file name is “CPI.xls”. Calculate the logarithmic change of the price series, i.e., ∆cpit= cpit – cpit-1, where cpit […]