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dreamon
dreamon
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Standard How to interpret standard errors and t-values in Vector Error Correction Modelserror-correction terms?

When estimating a Vector Error Correction (VEC) model in EViews, the resulting output always shows the cointegrating relationserror-correction terms together with standard errors and t-values for the included variables, and I was wondering if and how these numbers matter for the results?

In my understanding, the presence of cointegration among two or more variables is determined based on the Johansen Cointegration Trace/Eigenvalue test, and the actual cointegrating relationerror correction equation(s) are then retrieved by estimating a VEC model of the variables. Following this procedure, however, all variables included in the VEC estimation enter the cointegrating relationerror correction term, even though some of them may have no long-term relation with the other variables whatsoever, and thetheir SE/t-values of the variables in the cointegrating relation change depending on the ordering specified. Do SE/t-values actually play a role in determining the correct cointegrating relation(s)?

Standard errors and t-values in Vector Error Correction Models

When estimating a Vector Error Correction (VEC) model in EViews, the resulting output always shows the cointegrating relations together with standard errors and t-values for the included variables, and I was wondering if and how these numbers matter for the results?

In my understanding the presence of cointegration among two or more variables is determined based on the Johansen Cointegration Trace/Eigenvalue test, and the actual cointegrating relation(s) are then retrieved by estimating a VEC model of the variables. Following this procedure, however, all variables included in the VEC estimation enter the cointegrating relation, even though some of them may have no long-term relation with the other variables whatsoever, and the SE/t-values of the variables in the cointegrating relation change depending on the ordering specified. Do SE/t-values actually play a role in determining the correct cointegrating relation(s)?

How to interpret standard errors and t-values in error-correction terms?

When estimating a Vector Error Correction (VEC) model in EViews, the resulting output always shows the error-correction terms together with standard errors and t-values for the included variables, and I was wondering if and how these numbers matter for the results?

In my understanding, the presence of cointegration among two or more variables is determined based on the Johansen Cointegration Trace/Eigenvalue test, and the error correction equation(s) are then retrieved by estimating a VEC model of the variables. Following this procedure, however, all variables included in the VEC estimation enter the error correction term, even though some of them may have no long-term relation with the other variables whatsoever, and their SE/t-values change depending on the ordering specified. Do SE/t-values actually play a role in determining the correct cointegrating relation(s)?

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dreamon
dreamon
  • 129
  • 1
  • 9

Standard errors and t-values in Vector Error Correction Models

When estimating a Vector Error Correction (VEC) model in EViews, the resulting output always shows the cointegrating relations together with standard errors and t-values for the included variables, and I was wondering if and how these numbers matter for the results?

In my understanding the presence of cointegration among two or more variables is determined based on the Johansen Cointegration Trace/Eigenvalue test, and the actual cointegrating relation(s) are then retrieved by estimating a VEC model of the variables. Following this procedure, however, all variables included in the VEC estimation enter the cointegrating relation, even though some of them may have no long-term relation with the other variables whatsoever, and the SE/t-values of the variables in the cointegrating relation change depending on the ordering specified. Do SE/t-values actually play a role in determining the correct cointegrating relation(s)?