A simple example is provided by the bivariate process whose first component is the random walk

A simple example is provided by the bivariate process whose first component is the random walk

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A simple example is provided by the bivariate process whose first component is the random walk
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and whose second component consists of noisy observations of the same random walk,

YtXt Wt, t= 12, . . . , {Wt} ∼ IID (02),

where {Wt } is independent of {Zt}. Then {(Xt, Yt )_} is integrated of order 1 and cointegrated with cointegration vector α (1,−1)

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