we use the identity
DESCRIPTION
Which conditions should the expected cointegration mean satisfy?. Generally we would like the mean of an equilibrium error to be equal to zero!. We use the identity. The case with a constant and a trend. When there is a linear time trend in the equations, then:. A simulated example. - PowerPoint PPT PresentationTRANSCRIPT
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We use the identity
Generally we would like the mean of an equilibrium errorto be equal to zero!
Which conditions should the expected cointegration mean satisfy?
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The case with a constant and a trend
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When there is a linear time trend in the equations, then:
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A simulated example
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Five cases
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The MA representation with determ. comp.
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The MA representation with a trend in the equations:
Linear trends in the variables can derive from:
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Dummy variables and the VAR
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The simplified model can be written as:
The expected value of the process and the cointegration relations becomes:
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The dynamic properties of the data can now be expressed as:
where
It is easy to see that:
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Illustration
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Are the observed outliers additive or innovational?
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An additive outlier in real money stock
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The Danish VAR model with dummy variables
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The unrestricted VAR with dummies
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We need to distinguish between: