2.2.1 Co-integration Concept
Co-integration describes the long-term equilibrium relationship between
time series. If a time series is non-stationary but becomes stationary
after d-difference, it is called d-order simple integer, which is
recorded as I (d). If the time series itself is stationary, it is
recorded as I (0). The two time series are defined as and. If meeting
the following conditions:
- Xit ~I(d) andYit ~I(d) ,
(i =1,2,…,n), d is an integer;
- There is a constant β, which makesYt-βXt ~I(0) ;
Then, Xt and Yt are
co-integrated, and β is called co-integration vector.