IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Symmetry and Separability in Two-Country Cointegrated VAR Models: Representation and Testing

Listed author(s):
  • Hans-Martin Krolzig


  • Reinhold Heinlein


Introducing the approach by Masanao Aoki (1981) to time series econometrics, we show that the dynamics of symmetric linear possibly cointegrated two-country VAR models can be separated into two autonomous subsystems: the country averages and country differences, where the latter includes the exchange rate. The symmetric two-country cointegrated VAR model is synchronized, ie the two countries are driven by the same common trends, if and only if the country-differences subsystem is stable. It is shown that separability carries over even under mild asymmetries such as difference in the size of the countries' economies. The possibilities of a recursive structural VECM representation under symmetry is evaluated. The derived conditions for symmetry and separability are easily testable and applied to nine-dimensional quarterly cointegrated VAR models for five different country pairs in the post-Bretton-Woods era. We find evidence for the symmetry of the cointegration space, which is of practical importance as it allows for the identification of the cointegration vectors in much smaller systems, and for the exchange rate equation in general.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 1323.

in new window

Date of creation: Dec 2013
Handle: RePEc:ukc:ukcedp:1323
Contact details of provider: Postal:
School of Economics, University of Kent, Canterbury, Kent, CT2 7NP

Phone: +44 (0)1227 827497
Web page:

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ukc:ukcedp:1323. 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: (Tracey Girling)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.