Replication data for: Testing for Cointegrating Relationships with Near-Integrated Data

Applied analyses are often based on inferences that time series are integrated and cointegrated. Typically analyses rest on Dickey–Fuller pretests for unit roots and a test for cointegration based on the Engle–Granger two-step method.

We argue that this approach is not a good one and use Monte Carlo analysis to show that these tests can lead analysts to conclude falsely that the data are cointegrated (or nearly cointegrated) when the data are near-integrated and not cointegrating. Further, analysts are likely to conclude falsely that the relationship is not cointegrated when it is. We show how inferences are highly sensitive to sample size and the signal-to-noise ratio in the data.