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A Structural Vector Error Correction Model with Short-run and Long-run Restrictions

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  • Kyungho Jang

    (Inha University)

Abstract

We consider structural vector error correction models (VECMs) in which permanent shocks are partially identified with a set of long-run restrictions, and fully identified with an additional set of short-run restrictions. An identification method with a combination of short-run and long-run restrictions has been studied in the vector autoregressive models literature, but not thoroughly applied to the VECM framework. There exists a separation in the literature; permanent shocks are identified with long-run restrictions while transitory shocks are identified with short-run restrictions. This paper's innovation is the identification of permanent shocks using both horizontal restrictions.

Suggested Citation

  • Kyungho Jang, 2008. "A Structural Vector Error Correction Model with Short-run and Long-run Restrictions," Korean Economic Review, Korean Economic Association, vol. 24, pages 199-232.
    • Handle: RePEc:kea:keappr:ker-20080630-24-1-08
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cointegration; Identification; Estimation; Impulse Response; Forecast-Error Variance Decomposition; Money Demand;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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