On the adjustment matrix in error correction models

• 成果类型: Article
• 署名作者: Rossana, RJ
• 署名单位: Wayne State University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(98)00026-9
• 发表日期: 1998
• 页码: 427-444
• 关键词: Cointegration; vector autoregression

摘要

This paper explores the determinants of the adjustment matrix in error correction models within two intertemporal models of the firm. In a production smoothing model of inventories, it is shown that the adjustment matrix contains the speed of adjustment of inventories as conjectured in previous work but this parameter matrix also contains the parameters from the autoregressive polynomials associated with the stochastic, unobservable shocks in the model. Two empirical examples are provided suggesting that these unobservable shocks cannot be assumed to be serially uncorrelated. In a flexible wage model of a labor market, the impact upon the adjustment matrix of normalizing the cointegrating matrix is studied. In contrast to one-state variable problems, normalization of the cointegrating matrix is arbitrary on economic and statistical grounds in this model and it is shown that, even with serially uncorrelated shocks, estimating the elements of the adjustment matrix may not provide an estimate of the speed of adjustment under some normalizations of the cointegrating matrix. The implication of the analysis is that without guidance from an economic model about the interpretation of elements of the adjustment matrix under alternative normalizations of the cointegrating matrix, or when unobservable shocks are serially correlated, economic interpretation of estimates of the adjustment matrix will be hazardous. (C) 1998 Elsevier Science B.V. All rights reserved.