On the interactions of unit roots and exogeneity

The paper considers the impact on estimation and inference of interactions between the existence of unit roots in a data generation process and the presence or absence of weak and strong exogeneity of conditioning variables for the parameters of interest in individual cointegrated linear relationships. The asymptotic distributions of estimators for single equation conditional linear relations are analyzed in conjunction with a Monte Carlo study. The results confirm the important role of weak exogeneity in single equation estimation from integratedcointegrated data; highlight the advantages of using an asymptotic analysis to understand the complicated interactions observed; and reveal the accuracy of the limiting distributions in characterizing finite sample behaviour.