Bridging Economic Theory Models and the Cointegrated Vector Autoregressive Model

Møller, Niels Framroze
Authors registered in the RePEc Author Service: Niels Framroze Møller ()

Economics - The Open-Access, Open-Assessment E-Journal, 2008, vol. 2, issue 36, pages 1-29

Abstract: Examples of simple economic theory models are analyzed as restrictions on the Cointegrated VAR (CVAR). This establishes a correspondence between basic economic concepts and the econometric concepts of the CVAR: The economic relations correspond to cointegrating vectors and exogeneity in the economic model is related to econometric concepts of exogeneity. The economic equilibrium corresponds to the so-called long-run value (Johansen 2005), the long-run impact matrix, C; captures the comparative statics and the exogenous variables are the common trends. The adjustment parameters of the CVAR are related to expectations formation, market clearing, nominal rigidities, etc. Finally, the general-partial equilibrium distinction is analyzed. --

Keywords: Cointegrated VAR; unit root approximation; economic theory models; expectations; Hybrid New Keynesian Phillips Curve; general equilibrium (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2008
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Working Paper: Bridging Economic Theory Models and the Cointegrated Vector Autoregressive Model (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifweej:7460

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