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- Thu Nov 12, 2015 4:32 pm
- Forum: Econometric Discussions
- Topic: Fixed effects regression
- Replies: 0
- Views: 1920
- Thu Nov 12, 2015 4:30 pm
- Forum: Econometric Discussions
- Topic: Error correction model
- Replies: 0
- Views: 1904
Error correction model
yt=αyt−1+β0xt+β1xt−1+ϵt, 0<α<1,(t=1,...,T) where xt is an I(1) process independent from ϵt for all s and t, and ϵt,t=1,...,T are i.i.d with mean zero and variance σ^2 Question 1) Suppose that β0≠−β1. Is it possible that yt is stationary? 2) Write down the error correction form of the model, showing ...