New answers tagged cointegration
2
votes
Accepted
"Strength" of cointegration
A function of this first eigenvalue is a test statistic for the null of no cointegration, see The eigen values of Johansen's cointegration procedure, viz.
$$
-T\log(1-\hat\lambda_1)
$$
To the ...
- 34.8k
2
votes
ECM: adding I(0) to long-term relation
Let's build ECM from ground up following a general idea in Engle, Granger (1987).
regress the non-stationary part on $x_1$:
$$ y_t=\beta_0+\beta_1 x_{1t}+\varepsilon_t
$$
obtain the residuals $\hat\...
- 62.3k
1
vote
ECM: adding I(0) to long-term relation
First, it is impossible that $x_2$ affects $y$ but not $\Delta y$. Given the history of $y_t$ up to time $t-1$, what affects $y_t$ will also affect $\Delta y_t$; after all, the latter is the same $y_t$...
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