Cointegrating Vector Restrictions

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Cointegrating Vector Restrictions

Postby PERRYGOGAS » Thu Jan 26, 2012 11:27 am

Maybe this makes more sense:

I have the system:

c, i, m-p, y, R The vars are real consumption, real investment, real money balances, real output and the interest rate respectively.

The cointegration test shows that I have two cointegrating vectors. I expect that these two are the consumption-output ratio 1 to 1 relationship
and the money demand function m-p has 1 to 1 with y and negative and small with R.

My question is: What is the restriction I have to run in Eviews to identify as the cointegrating vectors that I detected the consumption-output and
the money demand function?

For the first I know that the restriction is set as [1, 0, 0, -1, 0]
But for the money demand is it:

a. [0, 0, 1, -1, bR] or
b. [0, 0, -1, -1, bR]

I am confused with the sign of real money balances (m-p)...
Last edited by PERRYGOGAS on Thu Jan 26, 2012 1:06 pm, edited 1 time in total.

Posts: 36
Joined: Sat Nov 01, 2008 12:22 pm

Re: Cointegrating Vector Restrictions

Postby PERRYGOGAS » Fri Jan 27, 2012 9:31 am


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