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Speed of adjustment in cointegrated systems

Listed author(s):
  • Fanelli, Luca
  • Paruolo, Paolo

This paper discusses summary measures for the speed of adjustment in possibly cointegrated Vector Autoregressive Processes (VAR). In particular we propose long-run half-lives, based on interim and total multipliers. We discuss their relation with Granger-noncausality and other types of half-life, which are shown to convey different information, except in the univariate AR(1) case. We present likelihood-based inference on long-run half-lives, regarded as discrete functions of parameters in the VAR model. It is shown how asymptotic confidence regions can be defined. An empirical illustration concerning speed of adjustment to purchasing-power parity is provided.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(10)00062-X
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 158 (2010)
Issue (Month): 1 (September)
Pages: 130-141

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Handle: RePEc:eee:econom:v:158:y:2010:i:1:p:130-141
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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