Recent Developments in Cointegration
It is well known that inference on the cointegrating relations in a vector autoregression
(CVAR) is difficult in the presence of a near unit root. The test for a given cointegration vector can have
rejection probabilities under the null, which vary from the nominal size to more than 90%. This paper
formulates a CVAR model allowing for multiple near unit roots and analyses the asymptotic
properties of the Gaussian maximum likelihood estimator. Then two critical value adjustments