Spurious regression theory with nonstationary fractionally integrated processes

This paper develops an analytical study of the asymptotic distributions obtained when we run linear regressions in the levels of nonstationary fractionally integrated Fl(d) processes, that are spuriously related in a multivariate single-equation setting which allows for the existence of cointegrating relationships and quite general deterministic components. In doing this, the analytical studies of Phillips (1986), Haldrup (1994) and Marmol (1995, 1996) are embedded in our results. (C) 1998 Elsevier Science S.A. All rights reserved.