Time-varying cointegration, identification, and cointegration spaces
We derive the conditions under which time-varying cointegration leads to cointegration spaces that may be time-invariant or, in contrast, time-varying. The model of interest is a vector error correction model with arbitrary time-varying cointegration parameters. We clarify the role of identification and normalization restrictions and show that structural breaks in error-correction models may actually correspond to stable long-run economic relationships, as opposed to a single-equation setup, in which an identification restriction is imposed. Moreover, we show that, in a time-varying cointegrating relationship with a given number of variables and cointegration rank, there is a minimum number of orthogonal Fourier functions that most likely guarantees time-varying cointegrating spaces.
Year of publication: |
2013
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Authors: | Filipe, Martins Luis ; Gabriel Vasco J. |
Published in: |
Studies in Nonlinear Dynamics & Econometrics. - De Gruyter, ISSN 1558-3708. - Vol. 17.2013, 2, p. 199-209
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Publisher: |
De Gruyter |
Saved in:
Online Resource
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