The effect of linear time trends on the KPSS test for cointegration

The so-called KPSS test for the null hypothesis of cointegration builds on residuals from single equation regressions. Critical values have been provided for regressions with and without detrendirig. Here it is shown that the latter are not appropriate if the series display linear trends, although this does not mean that detrending is required. In this paper adequate percentiles are suggested for series that follow linear time trends, and tests are based on regressions without detrending. These percentiles are readily available from the literature.