Biased Estimation in a Simple Extension of a Standard Error Correction Model
This paper considers an expectations augmented version of the Engle and Granger (1987) error correction model and shows that standard inference about the adjustment coefficients can be severely biased. This has implications for long–run causality and impulse–response analysis in particular. However, a sometimes simple remedy exists which only requires some additional regressions. The results are illustrated using U.S., German and Swiss data.
Volume (Year): 145 (2009)
Issue (Month): I (March)
|Contact details of provider:|| Postal: |
Phone: +41 (0)44 631 32 34
Fax: +41 (0)44 631 39 01
Web page: http://www.sjes.ch
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ses:arsjes:2009-i-2. 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: (Peter Steiner)
If references are entirely missing, you can add them using this form.