This note gives a few practical guidelines for cointegration analysis. The focus is on testing the cointegration rank in a VAR model and on how an intercept and a trend should be incorporated in the model. Only two cases appear relevant for most economic data.

We consider representation, estimation and inference on cointegration in a (PVAR). We show that cointegration amounts to a restriction on a product of parameter matrices. We therefore use GMM to construct estimators of the long-run (cointegration) parameters and to obtain test statistics for...