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unrestricted and restricted cointegration and VECM

Posted: Mon May 03, 2010 6:30 pm
by shevchenko62
I am trying to do cointegration test on the long run equilibrium relationship between stock price and macroeconomic variables. I have tested those series with ADF and all of them are I(1). But somehow, I am confused with the difference between unrestricted cointegration, restricted cointegration and VECM. I am not able to proceed because of this confusion. Can someone pls explain this? And also why are they needed?

Thanks a lot.