IDENTIFICATION AND DICHOTOMIZATION OF LONG- AND SHORT-RUN RELATIONS OF COINTEGRATED VECTOR AUTOREGRESSIVE MODELS

We show that the usual rank condition is necessary and sufficient to identify a vector autoregressive process whether the variables are I(0) or I(d) for d = 1,2,... We then use this rank condition to demonstrate the interdependence between the identification of short-run and long-run relations of co...

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Veröffentlicht in:Econometric theory 2001-10, Vol.17 (5), p.889-912
1. Verfasser: Hsiao, Cheng
Format: Artikel
Sprache:eng
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Zusammenfassung:We show that the usual rank condition is necessary and sufficient to identify a vector autoregressive process whether the variables are I(0) or I(d) for d = 1,2,... We then use this rank condition to demonstrate the interdependence between the identification of short-run and long-run relations of cointegrated process. We find that both the short-run and long-run relations can be identified without the existence of prior information to identify either relation. But if there exists a set of prior restrictions to identify the short-run relation, then this same set of restrictions is sufficient to identify the corresponding long-run relation. On the other hand, it is in general not possible to identify the long-run relations without information on the complete structure. The relationship between the identification of a vector autoregressive process and a Cowles Commission dynamic simultaneous equations model is also clarified.
ISSN:0266-4666
1469-4360
DOI:10.1017/S026646660117502X