Applied Conintegration Analysis in the Mirror of Macroeconomic Theory
AbstractCointegration analyses of macroeconomic time series are often not based on fully specified theoretical models. We use a theoretical model to scrutinize common procedures in applied cointegration analysis. Monte Carlo experiments show that 1) some tests of the cointegration vectors do not work well on series generated by an equilibrium cycle model; (2) cointegration restrictions add little to forecasting; (3) structural VAR models based on weak long-run restrictions seem to work well. The main disadvantages of cointegration analysis without strong links to economic theory are that it makes it hard to estimate and interpret the cointegration vectors. Copyright 1996 by John Wiley & Sons, Ltd.
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Bibliographic InfoPaper provided by Stockholm - International Economic Studies in its series Papers with number 584.
Length: 24 pages
Date of creation: 1994
Date of revision:
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Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.
Web page: http://www.iies.su.se/
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BUSINESS CYCLES; STOCHASTIC MODELS;
Other versions of this item:
- Soderlind, Paul & Vredin, Anders, 1996. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 363-81, July-Aug..
- Söderlind, Paul & Vredin, Anders, 1994. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," Working Paper Series in Economics and Finance 30, Stockholm School of Economics.
- Söderlind, Paul & Vredin, Anders, 1995. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," CEPR Discussion Papers 1120, C.E.P.R. Discussion Papers.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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