### Cointegrating Vector Restrictions

Posted:

**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,

b. [0, 0,

I am confused with the sign of real money balances (m-p)...

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] orb. [0, 0,

**-1**, -1, bR]I am confused with the sign of real money balances (m-p)...