This paper provides a proof of Granger's (1986) error correction model for fractionally cointegrated variables and points out a necessary assumption that has not been noted before. Moreover, a simpler, alternative error correction model is proposed which can be employed to estimate fractionally cointegrated systems in three steps.

, ,,
Journal of Time Series Analysis
Erasmus School of Economics

Dittmann, I. (2004). Error correction models for fractionally integrated processes. Journal of Time Series Analysis, 25(1), 27–32. doi:10.1111/j.1467-9892.2004.00335.x