A Structural Vector Error Correction Model with Short-run and Long-run Restrictions

Kyungho Jang
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Kyungho Jang: Inha University

Korean Economic Review, 2008, vol. 24, 199-232

Abstract: We consider structural vector error correction models (VECMs) in which permanent shocks are partially identified with a set of long-run restrictions, and fully identified with an additional set of short-run restrictions. An identification method with a combination of short-run and long-run restrictions has been studied in the vector autoregressive models literature, but not thoroughly applied to the VECM framework. There exists a separation in the literature; permanent shocks are identified with long-run restrictions while transitory shocks are identified with short-run restrictions. This paper's innovation is the identification of permanent shocks using both horizontal restrictions.

Keywords: Cointegration; Identification; Estimation; Impulse Response; Forecast-Error Variance Decomposition; Money Demand (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2008
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