The term cointegration was defined by Granger (1983) as a formulation of the phenomenon that nonstationary processes can have linear combinations that are stationary. It was his investigations of the relation between cointegration and error correction that brought modelling of vector autoregressions with unit roots and cointegration to the center of attention in applied and theoretical econometrics; see Engle and Granger (1987).
Cointegration is a statistical property of time series variables. Cointegration has become an important property in contemporary time series analysis. Time series often have trends – either deterministic or stochastic. In a seminal paper, Charles Nelson and Charles Plosser (1982) showed that most time series have stochastic trends – these are also called unit root processes, or processes integrated of order 1—I(1).
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