Existence of a cointegration relationship between two time series in the time domain imposes restrictions on the series zero-frequency behaviour in terms of their squared coherence, phase and gain, in the frequency domain. I derive these restrictions by studying cross-spectral properties of a cointegrated bivariate system. Specifically, I demonstrate that if two difference stationary series, Xt and Yt, are cointegrated with a cointegrating vector [1 b] and thus share a common stochastic trend, then at the zero frequency, the squared coherence of (1 - L)Xt and (1 - L)Yt will equal one, their phase will equal zero, and their gain will equal |b|.
- Common stochastic trend
- Frequency domain analysis