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Estimating and Restricting Growth Rates and Cointegration Means With Applications to Consumption and Money Demand

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Abstract

The parameters in the cointegration vector and the loading parameters are not the only interesting parameters in a vector cointegration model. With a reformulation of the model the intercept parameters can be decomposed into growth parameters and cointegration mean parameters. These parameters have economic interpretations and are therefore also important. We show how these parameters can be estimated and restricted. The latter can be achieved by using a linear switching algorithm. Consumption and money demand applications illustrate the method.

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  • Håvard Hungnes, 2001. "Estimating and Restricting Growth Rates and Cointegration Means With Applications to Consumption and Money Demand," Discussion Papers 309, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:309
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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895, April.
    6. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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    More about this item

    Keywords

    Johansen procedure; cointegrated VAR; growth rates; cointegration means; linear switching algorithm; consumption; money demand; savings ratio.;
    All these keywords.

    JEL classification:

    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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