Author(s)

Yunyun Lv

Department of Economics, Kansas State University, Manhattan, KS, USA.

Since macroeconomic research cannot be replicated, most studies may claim their conclusive research findings solely based on the statistical significance of the estimated coefficients. In this framework, we use a small simulation experiment to show that if variables affect the economy through different horizons, even though the error term is not correlated with both the explanatory variables on the right-hand side (R.H.S.) of a model and the dependent variable from a traditional view, the estimated coefficients can still be biased. The evidence provided by this paper may explain the refutation and controversy results in the modern research.

Cointegration in the Longer Horizons, Simulation

Lv, Y. (2017) How Can the Error Term Be Correlated with the Explanatory Variables on the R.H.S. of a Model?. Theoretical Economics Letters, 7, 448-453. doi: 10.4236/tel.2017.73033.