Christensen, Tim M; Hurn, Stan; Pagan, Adrian - National Centre for Econometric Research (NCER) - 2009
This paper considers VAR/VECM models for variables exhibiting cointegration and common features in the transitory … components. While the presence of cointegration reduces the rank of the long-run multiplier matrix, other types of common … features lead to rank reduction in the short-run dynamics. These common transitory components arise when linear combination of …