Codependence and Cointegration

Carsten Trenkler and Enzo Weber

No 437, University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics

Abstract: We introduce the idea of common serial correlation features among non-stationary, cointegrated variables. That is, the time series do not only trend together in the long run, but adjustment restores equilibrium immediately in the period following a deviation. Allowing for delayed re-equilibration, we extend the framework to codependence. The restrictions derived for VECMs exhibiting the common feature are checked by LR and GMM-type tests. Alongside, we provide corrected maximum codependence orders and discuss identification. The concept is applied to US and European interest rate data, examining the capability of the Fed and ECB to control overnight money market rates.

Keywords: VAR; serial correlation common features; codependence; cointegration (search for similar items in EconPapers)
JEL-codes: C32 E52 (search for similar items in EconPapers)
Date: 2009-10-21
New Economics Papers: this item is included in nep-ecm and nep-ets
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Persistent link: https://EconPapers.repec.org/RePEc:bay:rdwiwi:9852

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