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Speed of adjustment in cointegrated systems

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  • Fanelli, Luca
  • Paruolo, Paolo

Abstract

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.

Suggested Citation

  • Fanelli, Luca & Paruolo, Paolo, 2010. "Speed of adjustment in cointegrated systems," Journal of Econometrics, Elsevier, vol. 158(1), pages 130-141, September.
  • Handle: RePEc:eee:econom:v:158:y:2010:i:1:p:130-141
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    Cited by:

    1. Camarero, Mariam & D'Adamo, Gaetano & Tamarit, Cecilio, 2014. "Wage leadership models: A country-by-country analysis of the EMU," Economic Modelling, Elsevier, vol. 44(S1), pages 2-11.
    2. Massimiliano Castellani & Luca Fanelli & Marco Savioli, 2013. "Government Fiscal Efforts vs. Labour Union Strikes: It Takes Two to Tango," Working Paper series 33_13, Rimini Centre for Economic Analysis, revised Jan 2014.
    3. Gaetano D’Adamo, 2014. "Wage spillovers across sectors in Eastern Europe," Empirical Economics, Springer, vol. 47(2), pages 523-552, September.
    4. Girardi, Riccardo & Paruolo, Paolo, 2013. "Wages and prices in Europe before and after the onset of the Monetary Union," Economic Modelling, Elsevier, vol. 35(C), pages 643-653.
    5. Paolo Paruolo & Ben Murphy & Greet Janssens-Maenhout, 2011. "Do emissions and income have a common trend? A country-specific, time-series, global analysis, 1970-2008," Economics and Quantitative Methods qf1113, Department of Economics, University of Insubria.
    6. Luca Fanelli & Marco M. Sorge, 2015. "Indeterminacy, Misspecification and Forecastability: Good Luck in Bad Policy?," CSEF Working Papers 402, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Matteo Barigozzi & Antonio Conti, 2013. "On the Stability of Euro Area Money Demand and its Implications for Monetary Policy," LEM Papers Series 2013/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Machava, Agostinho, 2017. "The Macroeconomic Determinants of the Pass-Through from the Market Interest Rate to the Bank Lending Rate in Mozambique," Umeå Economic Studies 954, Umeå University, Department of Economics.
    9. M. Castellani & L. Fanelli & M. Savioli, 2015. "Government fiscal efforts vs. labour union strikes. Strategic substitutes or complements?," Working Papers wp1013, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Angelini, Giovanni & Bacchiocchi, Emanuele & Caggiano, Giovanni & Fanelli, Luca, 2017. "Uncertainty across volatility regimes," Research Discussion Papers 35/2017, Bank of Finland.
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    More about this item

    Keywords

    Half-life [pi]-life Speed of adjustment Impact factors Vector equilibrium correction Interim and total multipliers;

    JEL classification:

    • 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
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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