Generalised Cointegration: A Non-linear Concept P. A. V. B. Swamy, George S. Tavlas, Stephen G. Hall and George Hondroyiannis Abstract In this paper we propose a new generalization of the concept of cointegration which allows for the possibility that a set of variables are involved in an unknown non- linear relationship. These variables may be non-stationary, but there exists a nonlinear combination of them which eliminates the non-stationarity. We then introduce an estimation technique that allows us to test for the presence of this generalized cointegration in the absence of knowledge as to the true non-linear functional form and the full set of variables. We outline the basic stages of the technique and discusses in detail how the issue of non-stationarity and cointegration affect each stage of the TVC estimation procedure. Keywords Generalized cointegration, non-stationarity, Time-varying coefficient model ⋅ Coefficient driver JEL Classification Numbers C130 ⋅ C190 ⋅ C220 ________________________________________________________________________ The views expressed in this paper are the authors’ own and do not necessarily represent those of their respective institutions. ____________________________________________________________________ P. A. V. B. Swamy G. S. Tavlas (Corresponding author) Retired from Federal Reserve Board, Economic Research Department, Washington, DC, Bank of Greece, 21 El. Venizelos 6333 Brocketts Crossing Ave. 102 50. Athens, Greece Kingstowne, VA 22315 e-mail: GTavlas@bankofgreece.gr e-mail: swamyparavastu@hotmail.com Stephen G. Hall George Hondroyiannis Leicester University and Bank of Greece and Bank of Greece and Harokopio NIESR, Room: Astley Clarke 116, University, 21 E. Venizelos Ave. University Road, Leicester, 102 50 Athens, e-mail: LEI 7RH, UK, ghondroyiannis@bankofgreece.gr e-mail: s.g.hall@le.ac.uk