Are the Economies of Canada and the United States Integrated? Evidence from Cointegration Analysis

In recognition of his contributions to the development of the method of cointegration analysis for analyzing nonstationary time series, late Sir Clive William John Granger (September 4, 1934–May 27, 2009) was awarded the Nobel Memorial Prize in Economic Sciences in 2003. Since then, this method has become a dominant paradigm in empirical economic research. However, this method is not without critics. This article is one in a series to point out some inconsistent arguments used in the development of the method of cointegration analysis. To illustrate by example, we apply the method of time series cointegration analysis and present statistical evidence that supports the proposition that the economies of Canada and the United States are integrated. We conclude this article by laying out a foundation to formally criticize the method of cointegration analysis in subsequent research.