Time-Varying Cointegration with an Application to the UK Great Ratios

Authors: Stephen Millard, Simon Mc Kay Price and Katerina Petrova

Economic Letters, Vol. 193, August, 2020

We build on an estimation method which can accommodate time variation in a cointegrating relationship and present a test for cointegration under this setup. We apply our test procedure to the UK Great Ratios and find little evidence for cointegration when the parameters are assumed constant, but strong evidence when allowing them to drift slowly over time.