Johansen Test

The Johansen test is a statistical method used to determine whether multiple time series variables—like economic indicators—share a long-term equilibrium relationship. It helps identify if these variables move together over time, indicating they are linked by one or more common factors. This is useful for understanding interconnected systems, such as currency and interest rates, and for modeling their future behavior. Essentially, the Johansen test provides a rigorous way to detect long-term relationships among variables within a multivariate framework.