Cointegration Test Results 1/
|Sample size||Pound/U.S. dollar Rate||Nominal Effective Rate|
|e(t) = c + αm(t) + u(t)|
|e(t) = c + α[m(t)-m*(t)+e(t)] + u(t)|
Σ1 is the DW statistic for the cointegrating equation. Large values (greater than 0.386) reject the hypothesis of non-cointegration at the 95 percent confidence level. Σ2 is the t-statistic on the coefficient of the lagged value of u(t) in the Dickey-Fuller equation for u(t). Large values (greater than 3.17) reject the hypothesis of non-cointegration. Note that the critical values are approximate since Engle and Granger report statistics for only the 100 observation case.