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Cointegration, long-run structural modelling and weak exogeneity : two models of the UK economy

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Jacobs, Jan, 1960- and Wallis, Kenneth Frank. (2010) Cointegration, long-run structural modelling and weak exogeneity : two models of the UK economy. Journal of Econometrics, Vol.158 (No.1). pp. 108-116. ISSN 0304-4076

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Official URL: http://dx.doi.org/10.1016/j.jeconom.2010.03.017

Abstract

Cointegration ideas as introduced by Granger in 1981 are commonly embodied in empirical macroeconomic modelling through the vector error correction model (VECM). It has become common practice in these models to treat some variables as weakly exogenous, resulting in conditional VECMs. This paper studies the consequences of different approaches to weak exogeneity for the dynamic properties of such models, in the context of two models of the UK economy, one a national-economy model, the other the UK submodel of a global model. Impulse response and common trend analyses are shown to be sensitive to these assumptions and other specification choices.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Macroeconomics -- Econometric models, Cointegration, Exogeneity (Econometrics), Great Britain -- Economic conditions -- Econometric models
Journal or Publication Title:	Journal of Econometrics
Publisher:	Elsevier BV * North-Holland
ISSN:	0304-4076
Date:	September 2010
Volume:	Vol.158
Number:	No.1
Number of Pages:	9
Page Range:	pp. 108-116
Identification Number:	10.1016/j.jeconom.2010.03.017
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/5372