unrestricted and restricted cointegration and VECM
Posted: Mon May 03, 2010 6:30 pm
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.
Thanks a lot.