Speed of adjustment in cointegrated systems

Luca Fanelli () and Paolo Paruolo

Journal of Econometrics, 2010, vol. 158, issue 1, 130-141

Abstract: This paper discusses summary measures for the speed of adjustment in possibly cointegrated Vector Autoregressive Processes (VAR). In particular we propose long-run half-lives, based on interim and total multipliers. We discuss their relation with Granger-noncausality and other types of half-life, which are shown to convey different information, except in the univariate AR(1) case. We present likelihood-based inference on long-run half-lives, regarded as discrete functions of parameters in the VAR model. It is shown how asymptotic confidence regions can be defined. An empirical illustration concerning speed of adjustment to purchasing-power parity is provided.

Keywords: Half-life; [pi]-life; Speed; of; adjustment; Impact; factors; Vector; equilibrium; correction; Interim; and; total; multipliers (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Speed of Adjustment in Cointegrated Systems (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:158:y:2010:i:1:p:130-141

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