Abstract :
In this paper we propose a bootstrap version of the Wald test for cointegration in
a single-equation conditional error correction model. The multivariate sieve bootstrap
is used to deal with dependence in the series. We show that the introduced
bootstrap test is asymptotically valid. We also analyze the small sample properties
of our test by simulation and compare it with the asymptotic test and several alternative
bootstrap tests. The bootstrap test offers significant improvements in terms
of size properties over the asymptotic test, while having similar power properties.
The sensitivity of the bootstrap test to the allowance for deterministic components is
also investigated. Simulation results show that the tests with sufficient deterministic
components included are insensitive to the true value of the trends in the model and
retain correct size.
