Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation

Economic analysis suggests that there is a long run relationship between variables under consideration as stipulated by theory. This means that the long run relationship properties are intact. In other words, the means and variances are constant and not depending on time. However, most empirical researches have shown that the constancy of the means and variances are not satisfied in analyzing time series variables. In the event of resolving this problem most cointegration techniques are wrongly applied, estimated, and interpreted. One of these techniques is the Autoregressive Distributed Lag (ARDL) cointegration technique or bound cointegration technique. Hence, this study reviews the issues surrounding the…