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Cointegration, Long-Run Structural Modelling And Weak Exogeneity: Two Models Of The Uk Economy

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Author Info
Jan P.A.M. Jacobs ()
Kenneth F. Wallis ()

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Abstract

Cointegration ideas as introduced by Granger (1981) are commonly embodied in empirical macroeconomic modelling through the vector error correction model (VECM). It has also become common practice in these models to treat some variables as weakly exogenous, resulting in conditional VECMs. This paper studies the consequences of different approaches to weak exogeneity for the dynamic properties of such models, in the context of two models of the UK economy, one a national-economy model, the other the UK submodel of a global model. Impulse response and common trend analyses are shown to be sensitive to these assumptions and other specification choices.

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File URL: http://cama.anu.edu.au/Working%20Papers/Papers/2007/Jacobs_Wallis_122007.pdf
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Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number 2007-12.

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Length: 23 pages
Date of creation: Jun 2007
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Handle: RePEc:acb:camaaa:2007-12

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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  1. Adrian Pagan & M. Hashem Pesaran, 2007. "On Econometric Analysis of Structural Systems with Permanent and Transitory Shocks and Exogenous Variables," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  2. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April. [Downloadable!] (restricted)
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  3. Dees, S. & Holly, S. & Pesaran, M.H. & Smith, L.V., 2007. "Long Run Macroeconomic Relations in the Global Economy," Cambridge Working Papers in Economics 0661, Faculty of Economics, University of Cambridge. [Downloadable!]
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  4. Jesus Gonzalo & Clive W.J. Granger, 1991. "Estimation of Common Long-Memory Components in Cointegrated Systems," University of California at San Diego, Economics Working Paper Series 91-33, Department of Economics, UC San Diego.
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  5. Filippo di Mauro & L. Vanessa Smith & Stephane Dees & M. Hashem Pesaran, 2007. "Exploring the international linkages of the euro area: a global VAR analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 1-38. [Downloadable!]
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  6. repec:rus:hseeco:315150 is not listed on IDEAS
  7. M. Hashem Pesaran & Yongcheol Shin, 2002. "Long-Run Structural Modelling," Econometric Reviews, Taylor and Francis Journals, vol. 21(1), pages 49-87. [Downloadable!] (restricted)
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  8. Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Blackwell Publishing, vol. 12(5), pages 533-72, December. [Downloadable!] (restricted)
  9. Levtchenkova, S & Pagan, A R & Robertson, J C, 1998. " Shocking Stories," Journal of Economic Surveys, Blackwell Publishing, vol. 12(5), pages 507-32, December. [Downloadable!] (restricted)
  10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Adam Elbourne & Henk Kranendonk & Rob Luginbuhl & Bert Smid & Martin Vromans, 2008. "Evaluating CPB’s published GDP growth forecasts," CPB Documents 172, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  2. Mardi Dungey & Denise R Osborn, 2009. "Modelling International Linkages for Large Open Economies: US and Euro Area," Centre for Growth and Business Cycle Research Discussion Paper Series 121, Economics, The Univeristy of Manchester. [Downloadable!]
    Other versions:
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