Unit roots and cointegration analysis: The impact on empirical analysis in economics

The purpose of this paper is to examine some of the impacts of the theoretical literature relating to unit roots and cointegration on empirical analysis in economics. The results of a survey of time-series-related empirical papers in seven journals in 1995 indicate that about 40 per cent and 30 per cent of papers include tests for unit roots and cointegration, respectively. In testing for unit roots, the Augmented Dickey-Fuller procedure is clearly the most commonly used test. In testing for cointegration, the closely related Engle-Granger procedure is the most commonly used test but its dominance is not as pronounced.