8.6 Cointegrated VAR Models
To better understand cointegration, we focus on VAR models for their simplicity in estimation. Consider a k-dimensional VAR(p) time series 
with possible time trend so that the model is
8.35 
where the innovation 
is assumed to be Gaussian and 
= 
, where 
and 
are k-dimensional constant vectors. Write 
= 
. Recall that if all zeros of the determinant 
are outside the unit circle, then is unit-root stationary. In the literature, a unit-root stationary series is said to be ...
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