I'm regressing households' spending (PCE) on disposable income (PDI) between 1980 and 2018 for the U.S economy. I noticed that the coefficient of PDI is higher than 1. I first think that coeff. of PDI may be extreme due to possible autocorrelation or non-stationarity.
While conducting the ADF test, I tried the random walk, drift, and a trend.
However, according to the results of the test, PCE and PDI series are stationary with a drift.
I also applied the Gregory-Hansen cointegration test and find out that series are cointegrated in the long run at the breakpoint.
How can I solve this problem?
@Defne - Do u think that your data has trend or drift? First, ensure it.
If you think that it has drift, only then go ahead with this result otherwise test stationarity without drift. If you find the series I(1) then go ahead with cointegration.
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