Estimating the LQAC model with I(2) Variables

Tom Engsted () and Niels Haldrup ()

Economics Working Papers from School of Economics and Management, University of Aarhus

Abstract: This paper derives a method for estimating and testing the Linear Quadratic Adjustement Cost(LQAC) model when the target variable and some of the forcing variables follow I(2) processes. Based on a forward- looking error-correction formulation of the model it is shown how to obtain strongly consistent estimates of the structural long-run parameters and the adjustement cost parameter from both a linear and a non-linear cointegrating regression,where first- differences of the I(2) variables are included as regressors (multicointegration).

Keywords: MONEY SUPPLY; EXPECTATIONS (search for similar items in EconPapers)
JEL-codes: C10 C12 C32 E24 (search for similar items in EconPapers)
Date: 1996
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Related works:
Working Paper: Estimating the LQAC Model with I(2) Variables (1995)
Journal Article: Estimating the LQAC Model with I(2) Variables (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:aah:aarhec:1996-1

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