Economists and especially macro economists are confronted now with a new challenge by
the econometricians. Time series econometricians have pointed out that many
macroeconomic variables are non-stationary and therefore conventional estimation
techniques, based on the usual classical assumptions about the properties of the
disturbance terms, lead to mistaken inferences. Further developments in time series analysis
have shown that if the variables in a model are non-stationary, cointegration and error …

Previous papers by one of the authors, Perman (1989, 1991), have proved popular amongst
applied economists seeking an introduction to the new econometrics of unit roots and
cointegration. The aim of the present paper is, as before, to provide a comprehensive
overview of the field in a manner which minimises the technical knowledge required of the
reader and which offers intuitive explanations wherever possible. Other useful surveys, at a
slightly higher technical level, include the special issues of the Oxford Bulletin of Economics …