Abstract:
Local asymptotic power advantages are available for testing the hypothesis that the slope coefficient is zero in regressions of yt+k-
yton xtfor k > 1, when { yt} ~ I(0) and {xt} ~ I(0). The advantages of these long-horizon regression tests accrue in empirically
relevant regions of the admissible parameter space. In Monte Carlo experiments, small sample power advantages to long-horizon regression tests accrue in a region of the parameter space that
is larger than that predicted by the asymptotic analysis.