To cointegrate or not to cointegrate? That's a topological question

Abstract

We show that for any multivariate I( 1) process which does not cointegrate, it is possible to find another process sufficient1y elose to it where cointegration applies. Closeness is defined in terms of the spectral density matrices of the respective processes in differences, i.e., a metric which takes into account only the information in the (centred) second moments. The result may explain why in practice cointegration is found a bit 'too often'. Examples developing this point and simulations giving an insight on the metric used are also presented.