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I have estimated a VECM model in EViews and using the Johansen test I obtained that there were cointegration vectors. The output for the short-run equation of VECM contains two error correction terms and I was just wondering what is the speed of adjustment when you have two error correction terms in the equation.

How would I interpret these results? Please find my EViews output below.

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    – Richard Hardy
    Commented Jan 12, 2022 at 15:48

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There are two cointegrating relationships and thus two equilibria towards which your variables are adjusting. The slope coefficients on the error correction terms tell you the speed at which the adjustment towards each equilibrium goes. E.g. for the GDP (the first column of the table, aside from the title column), the adjustment towards the first equilibrium is given by the slope coefficient of -0.05. The adjustment towards, or perhaps away from, the second equilibrium is given by the slope coefficient of 0.0097. However, the adjustment of GDP w.r.t. the second equilibrium is questionable, as the second cointegrating equation (given at the top of your table) does not even include GDP (the coefficient on GDP in that equation is zero). So I wonder if that coefficient should not be restricted to be exactly zero.

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