Sun, Yiguo; Hsiao, Cheng; Li, Qi - In: Journal of Econometrics 164 (2011) 2, pp. 252-267
Many macroeconomic and financial variables are integrated of order one (or I(1)) processes and are correlated with each other but not necessarily cointegrated. In this paper, we propose to use a semiparametric varying coefficient approach to model/capture such correlations. We propose two...