Co‐Integration in Systems of Equations

Anindya Banerjee, Juan J. Dolado, John W. Galbraith and David F. Hendry

in Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data

Published in print May 1993 | ISBN: 9780198288107
Published online November 2003 | e-ISBN: 9780191595899 | DOI:

Series: Advanced Texts in Econometrics

 Co‐Integration in Systems of Equations

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Co‐integration in systems of equations is analysed. Linear co‐integrated systems are expressed in error‐correction form and maximum likelihood estimation and inference for co‐integrating vectors are discussed, focusing on the approach proposed by Johansen (1988). Methods of finding the co‐integrating rank are considered and circumstances in which dynamic single‐equation methods will be equivalent to systems methods are demonstrated. The analysis is again illustrated by a number of applications and evidence from simulation experiments. Forecasting in co‐integrated systems is noted.

Keywords: co‐integrating rank; co‐integration; error correction; forecasting; maximum likelihood; Søren Johansen

Chapter.  21289 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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