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Mean lag in general error correction models

Author

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  • Fuleky, Peter
  • Ventura, Luigi

Abstract

Most of the empirical literature inappropriately applies Hendry’s (1995) mean lag formula–which he derived for first order autoregressive distributed lag models under the assumption of a homogeneous long-run equilibrium–to error correction models that have complex lag structures and lack long-run homogeneity. We derive an expression for the mean lag in general error correction models without imposing the assumption of a homogeneous equilibrium. In addition, we quantify the bias due to the incorrect use of Hendry’s (1995) formula.

Suggested Citation

  • Fuleky, Peter & Ventura, Luigi, 2016. "Mean lag in general error correction models," Economics Letters, Elsevier, vol. 143(C), pages 107-110.
    • Handle: RePEc:eee:ecolet:v:143:y:2016:i:c:p:107-110
    DOI: 10.1016/j.econlet.2016.03.028
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    Citations

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    Cited by:

    1. Peter Fuleky & Luigi Ventura & Qianxue Zhao, 2018. "Common correlated effects and international risk sharing," International Finance, Wiley Blackwell, vol. 21(1), pages 55-70, March.
    2. Bakhat, Mohcine & Rosselló, Jaume & Sansó, Andreu, 2022. "Price transmission between oil and gasoline and diesel: A new measure for evaluating time asymmetries," Energy Economics, Elsevier, vol. 106(C).

    More about this item

    Keywords

    Mean lag; Autoregressive distributed lag model; Error correction model;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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