Non-linear error correction, asymmetric adjustment and cointegration
AbstractThis article links the intertemporal choice model with the non-linear error correction (NEC) model. It has three main components. First, it outlines a model of non-linear error correction, in which the linear error correction term ?Xt (the vector time series Xt is cointegrated, is the cointegrating vector) is replaced by the non-linear term g(?Xt), where g(.) is a non-linear function. Second, several types of asymmetries and the existence of multiple equilibria are discussed. The implications for the NEC model of trending targets are also explained. Third, it is shown that non-linear error correction is present in a trivariate series of UK employment, wage and capital stock.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 15 (1998)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Other versions of this item:
- Escribano, Álvaro & Pfann, Gerard, 1998. "Non-linear error correction, asymmetric adjustment and cointegration," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/2559, Universidad Carlos III de Madrid.
- C00 - Mathematical and Quantitative Methods - - General - - - General
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