This paper considers cointegrating regressions with
time varying coefficients. The coefficients are modeled
as smooth functions evolving over time. It is shown that
they can be estimated nonparametrically, using suitably
modified series estimators. Presented is the efficient
method of estimation, which relies on simple prefiltering
of the data and preestimation of the model. The test for
the adequacy of model specification is also developed.
Our model and statistical methods are applied to analyze
the U.S. automobile demand function.