Asymmetric Error Correction Models - some Comments and Improvements

Fachartikel 283

Fachbereich
Betriebswirtschaftslehre
Fachrichtung
Allg. BWL
Artikel
2005
Sprache
englisch

Beschreibung

In this essay the method to estimate asymmetric relations with error correction models by splitting the error correction term u[t-1] in [+] u[t-1] and [-] u[t-1] , proposed by Granger and Lee (1989), is proven. The results can be summarized in the following aspects:

- The sign-depending splitting of the error correction term does not enable the quantification of asymmetric effects.

- Symmetric as well as asymmetric error correction models are not completely specified, if the x-variable with level data and the time lag [t-1], on which the co-integrating regression is based, is not included in the function. The neglecting leads to considerably distorted parameters.

- The separate calculation of the error correction terms for the variables [+] y[t-1] and - y[t-1] , derived by splitting the y[t-1] -variable, proposed by the author,proves to be an exact approach to quantify asymmetric relations with error correction models.

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