On Error Correction Models: Specification, Interpretation, Estimation
Error Correction Models (ECMs) have proved a popular organizing principle in applied econometrics, despite the lack of consensus as to exactly what constitutes their defining characteristic, and the rather limited role that has been given to economic theory by their proponents. This paper uses a historical survey of the evolution of ECMs to explain the alternative specifications and interpretations and proceeds to examine their implications for estimation. The various approaches are illustrated for wage equations by application to U.K. labor market data 1855-1987. We demonstrate that error correction models impose strong and testable nonlinear restrictions on dynamic econometric equations, and that they do not obviate the need for modeling the process of expectations formation. With the exception of a few special cases, both the nonlinear restrictions and the modeling of expectations have been ignored by those who have treated ECMs as merely reparameterizations of dynamic linear regression models or vector autoregressions. Copyright 1991 by Blackwell Publishers Ltd
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 5 (1991)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0950-0804|
When requesting a correction, please mention this item's handle: RePEc:bla:jecsur:v:5:y:1991:i:1:p:97-128. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.