Download - We use the identity
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We use the identity
Generally we would like the mean of an equilibrium errorto be equal to zero!
Which conditions should the expected cointegration mean satisfy?
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The case with a constant and a trend
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When there is a linear time trend in the equations, then:
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A simulated example
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Five cases
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The MA representation with determ. comp.
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The MA representation with a trend in the equations:
Linear trends in the variables can derive from:
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Dummy variables and the VAR
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The simplified model can be written as:
The expected value of the process and the cointegration relations becomes:
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The dynamic properties of the data can now be expressed as:
where
It is easy to see that:
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Illustration
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Are the observed outliers additive or innovational?
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An additive outlier in real money stock
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The Danish VAR model with dummy variables
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The unrestricted VAR with dummies
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We need to distinguish between: