Econometric Methods for Modelling Systems With a Mixture of i(1) and i(0) Variables

Lance A. Fisher, Hyeon-Seung Huh, Adrian R. Pagan

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

This paper considers structural models with both I(1) and I(0) variables. The structural shocks associated with either set of variables could be permanent or transitory. We classify the shocks as (P1,P0) and (T1,T0), where P/T distinguishes permanent/transitory, while 1/0 means they are attached to structural equations with either I(1) or I(0) variables as their ‘dependent’ variable. We show that P0 shocks can affect cointegration analysis and provide a formula to compute the permanent component if they are present. Finally, we reformulate a well-known empirical structural vector autoregression showing the impact of P0 shocks when there are just long-run parametric and sign restrictions.

Original languageEnglish
Pages (from-to)892-911
Number of pages20
JournalJournal of Applied Econometrics
Volume31
Issue number5
DOIs
Publication statusPublished - 2016 Aug 1

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structural model
econometrics
Econometric methods
System modeling

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

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Econometric Methods for Modelling Systems With a Mixture of i(1) and i(0) Variables. / Fisher, Lance A.; Huh, Hyeon-Seung; Pagan, Adrian R.

In: Journal of Applied Econometrics, Vol. 31, No. 5, 01.08.2016, p. 892-911.

Research output: Contribution to journalArticle

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