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Automatic identification of general vector error correction models

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  • Arbués, Ignacio
  • Ledo, Ramiro
  • Matilla-García, Mariano

Abstract

There are a number of econometrics tools to deal with the different type of situations in which cointegration can appear: I(1), I(2), seasonal, polynomial, etc. There are also different kinds of Vector Error Correction models related to these situations. We propose a unified theoretical and practical framework to deal with many of these situations. To this aim: (i) a general class of models is introduced in this paper and (ii) an automatic method to identify models, based on estimating the Smith form of an autoregressive model, is provided. Our simulations suggest the power of the new proposed methodology. An empirical example illustrates the methodology.

Suggested Citation

  • Arbués, Ignacio & Ledo, Ramiro & Matilla-García, Mariano, 2016. "Automatic identification of general vector error correction models," Economics Discussion Papers 2016-33, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201633
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    More about this item

    Keywords

    time series; unit root; cointegration; error correction; model identification; Smith form;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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