CORRELATION THEORY OF SPURIOUSLY RELATED HIGHER-ORDER INTEGRATED PROCESSES

Herein we obtain the asymptotic distribution of the correlation coeffi cient between two stochastically independent higher order integrated p rocesses. Our theoretical results largely explain the Monte Carlo find ings on this topic recently reported in Banerjee et al. (Go-integratio n, error-correction, and the econometric analysis of non-stationary da ta, 1993, Oxford University Press, Oxford).