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Derek W. Bunn and Carlo Fezzi

6. A vector error correction model of the interactions among gas, electricity and carbon prices: an application to the cases of Germany and the United Kingdom Derek W. Bunn and Carlo Fezzi INTRODUCTION 6.1 The European Emissions Trading Scheme (EU ETS), started on 1 January 2005, has been a substantial initiative of the European Union (EU) to fulfil its carbon abatement targets following the Kyoto Protocol. According to the ETS directive (European Commission, 2003), tradable allowances are allocated to industrial emitters of carbon dioxide, specifying the

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Yun K. Kim

cointegrating relationships. Based on the findings, I implement vector autoregression (VAR) and vector error correction (VECM) models. In the VAR analysis, which captures the transitory (short-run) feedbacks among the growth rates of debt, GDP, and net worth, I observe a bidirectional positive feedback process between aggregate income and debt. According to the VECM estimation, which captures long-run relationships in a multi-equation framework, there is a negative long-run relationship between household debt and output. Our results provide evidence for household debt

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Gracjan Robert Bachurewicz

. Badarudin et al. (2013) extend Howells and Hussein's (1998) research. An important improvement was the use of the Chow breakpoint test which enables control of monetary policy regime changes. Their results for Canada, France, Germany, the US and the UK, based on vector error-correction model (VECM) and Wald tests, ‘lean towards the money endogeneity in the long run’ ( Badarudin et al. 2013 , p. 154). On the other hand, they also report bidirectional causality between bank loans and money supply in the majority of the analysed countries (ibid.). Another takeaway from

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Mohammad Ashraful Mobin and Abu Umar Faruq Ahmad

economic growth. Second, we investigate whether the religion of Islam has any impact on the performance of microfinance or not. To test the first hypothesis, we applied cointegration and the vector error correction model. For the second hypothesis, 193 M4091 HASSAN_9781784710729_t (v3).indd 193 16/12/2016 13:20 194 Handbook of empirical research on Islam and economic life we applied the panel system generalized method of moments (GMM) approach. The following sections present the findings of the previous study on microfinancing particularly in Islamic microfinancing

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Hongkil Kim

-run market rates). 1 The Horizontalist claims that the current and expected federal funds rate causes other market interest rates to move somewhat exogenously, while the Structuralist argues that market interest rates are predominantly set by market forces and the federal funds rate is, rather, endogenous to the macroeconomics environment through the Federal Reserve's reaction function. The issue addressed in this paper is to examine the validity of the above propositions by employing cointegration, vector error-correction modeling (VECM), and the Granger causality test

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Riaz Shareef, Suheija Hoti and Michael McAleer

Conditional Heteroscedasticity Autoregressive Integrated Moving Average Autoregressive Moving Average ARMA-Asymmetric GARCH Association of South East Asian Nations British Broadcasting Corporation Berndt, Hall, Hall and Hausman Box and Jenkins (1976) Caribbean Community and Common Market Caribbean Basin Initiative Constant Conditional Correlation Common External Tariff Cointegrating Regression Durbin Watson Cumulative Sum Dynamic Conditional Correlation District of Columbia Durbin-Watson Eastern Caribbean Central Bank Eastern Caribbean Currency Union Error Correction Model

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David Allen, Lee K. Lim and Trent Winduss

, estimate the vector error correction model (VECM) and undertake variance decomposition (VDC) analysis. After normalizing 132 East Asia and the Pacific share prices as the dependent variable LRSM will be used to determine the existence of a long run causal relationship by placing a restriction of zero on the variable in the cointegrating vector. The rejection of such a restriction implies the variable must enter the cointegrating vector significantly and a long run causal relationship is said to exist. The VECM is a vector autoregressive (VAR) model where the

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V

Edited by Brian Snowdon and Howard R. Vane

–Fuller (1979) test or Phillips–Perron tests (see Phillips, 1987). More generally, Engle and Granger (1987) consider the properties of two or more related variables, each of which is integrated of order one but has a resulting combination which is stationary. Such variables are said to be Vector autoregressions 715 cointegrated. The implications of cointegration are far-reaching for economic modelling and forecasting. First, if the variables in an equation are not cointegrated, then, because the error term is non-stationary, the relationship is likely to be misspecified and

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The forecasting fiasco

Exposing the Limitations and Abuses of Econometrics

Imad A. Moosa

) than a pure random walk. Dynamics Implies Random Walk It can be demonstrated that no matter what shape or form is taken by dynamics, all dynamic specifications boil down to the introduction of a lagged dependent variable. Hence, forecasting accuracy does not change much as a result of changing the dynamic form of the model. Start, for example, with the error correction specification represented by equation (11.3) . The equation can be simplified by replacing the three explanatory variables with a vector, x t , and imposing the restriction ℓ = 1. Since Δ s t

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Edited by Julio Segura and Carlos Rodríguez Braun

the likelihood analysis of vector cointegrated autoregressive models in a set of publications (1988, 1991, 1995 are probably the most cited). Let yt be a vector of m time series integrated of order 1. They are cointegrated of rank r if there are r < m linear combinations of them that are stationary. In this case, the dynamics of the time series can be represented by a vector error correction model, ∇yt = Pyt–1 + G1∇yt–1 + . . . + Gk∇yt–k + FDt + et, t = 1, . . ., T, where ∇ is the first difference operator such that ∇yt = yt – yt–1, Dt is a vector of 126 Jones