The power of single equation tests for cointegration

In recent research, Kanioura and Turner (2005) have proposed an F-test for cointegration based upon the joint significance of the level terms in an error correction model. In the present study, the analysis of this test is extended via comparison with the GLS-based cointegration test of Perron and Rodriguez (mimeo, 2001). The simulation evidence presented indicates that for the data generation process considered by Kanioura and Turner, the F-test possesses greater power than both the Engle-Granger and the GLS-based cointegration tests. An empirical examination of the relationship between UK non-durable consumers' expenditure and disposable income illustrates the findings of the simulation analysis, with the F-test alone able to reject the null of no cointegration between the series.