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Cointegration, long-run structural modelling and weak exogeneity: Two models of the UK economy

Jan Jacobs () and Kenneth Frank Wallis ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Cointegration ideas as introduced by Granger in 1981 are commonly embodied in empirical macroeco- nomic modelling through the vector error correction model (VECM). It has become common practice in these models to treat some variables as weakly exogenous, resulting in conditional VECMs. This paper studies the consequences of different approaches to weak exogeneity for the dynamic properties of such models, in the context of two models of the UK economy, one a national-economy model, the other the UK submodel of a global model. Impulse response and common trend analyses are shown to be sensitive to these assumptions and other specification choices.

JEL-codes: C32 C51 C52 (search for similar items in EconPapers)
Date: 2010-12
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http://www.eco.rug.nl/medewerk/jacobs/jjdownload/jacobswallis2010.pdf (application/pdf)

Related works:
Journal Article: Cointegration, long-run structural modelling and weak exogeneity: Two models of the UK economy (2010) Downloads
Working Paper: COINTEGRATION, LONG-RUN STRUCTURAL MODELLING AND WEAK EXOGENEITY: TWO MODELS OF THE UK ECONOMY (2007) Downloads
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