Chapter

The <i>I</i>(1) Models and Their Interpretation

Søren Johansen

in Likelihood-Based Inference in Cointegrated Vector Autoregressive Models

Published in print December 1995 | ISBN: 9780198774501
Published online November 2003 | e-ISBN: 9780191596476 | DOI: http://dx.doi.org/10.1093/0198774508.003.0005

Series: Advanced Texts in Econometrics

 							The I(1) Models and Their Interpretation

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We define the basic reduced form error correction model for I(1)variables where cointegration is modelled in terms of a reduced rank hypothesis on the impact matrix. This defines the cointegrating vectors and adjustment coefficients. A discussion of linear hypotheses on the cointegrating relations and the identification problem is given. We also discuss hypotheses on the adjustment coefficients and discuss the hypothesis of Granger non‐causality. The deterministic terms give rise to a number of models describing different properties of the process.

Keywords: adjustment coefficient; cointegrating vector; deterministic terms; error correction model; Granger non‐causality; I(1) variable; identification; reduced rank hypothesis

Chapter.  8491 words. 

Subjects: Econometrics and Mathematical Economics

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