Error Correction and Long Run Equilibrium in Continuous Time

Peter Phillips

No 882R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper deals with error correction models (ECM's) and cointegrated systems that are formulated in continuous time. Problems of representation, identification, estimation and time aggregation are discussed. It is shown that every ECM in continuous time has a discrete time equivalent model in ECM format. Moreover, both models may be written as triangular systems with stationary errors. This formulation simplifies both the continuous and the discrete time ECM representations and it helps to motivate a class of optimal inference procedures. It is further shown that long run equilibria in the continuous system are always identified in the discrete time reduced form, so that there is no aliasing problem for these coefficients.

Keywords: Error correction; spectral regression; differential equations; triangular system; temporal aggregation; co-integration (search for similar items in EconPapers)
Pages: 40 pages
Date: 1988, Revised 1989-07
Note: CFP 788.
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Published in Econometrica (July 1991), 59(4): 967-980

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Journal Article: Error Correction and Long-Run Equilibrium in Continuous Time (1991)
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