Cointegrating regressions with time varying coefficients

This paper considers cointegrating regressions with time varying coefficien ts, The coefficients are modeled as smooth functions evolving over time. It is shown that they can be estimated nonparametrically, using suitably modi fied series estimators. Presented is the efficient method of estimation, wh ich relies on simple prefiltering of the data and preestimation of the mode l. The test for the adequacy of model specification is also developed. Our model and statistical methods are applied to analyze the U.S. automobile de mand function.