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EFFICIENT ESTIMATION OF THE COINTEGRATING VECTOR IN ERROR CORRECTION MODELS WITH STATIONARY COVARIATES  

Seo, Byeong-Seon (Department of Economics, College Station)
Publication Information
Journal of the Korean Statistical Society / v.34, no.4, 2005 , pp. 345-366 More about this Journal
Abstract
This paper considers the cointegrating vector estimator in the error correction model with stationary covariates, which combines the stationary vector autoregressive model and the nonstationary error correction model. The cointegrating vector estimator is shown to follow the locally asymptotically mixed normal distribution. The variance of the estimator depends on the co­variate effect of stationary regressors, and the asymptotic efficiency improves as the magnitude of the covariate effect increases. An economic application of the money demand equation is provided.
Keywords
Cointegrating relationship; efficient estimation; stationary covariates;
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