Publication
The Korean Economic Review
A Structural Vector Error Correction Model with Shotr-Run and Long-Run Restrictions
Kyungho JangYear 2008Vol. 24No. 1
Abstract
We consider structural vector error correction models (VECMs) in which permanent shocks are partially identified with a set of long-run restrictions, and fully identified with an additional set of short-run restrictions. An identification method with a combination of short-run and long-run restrictions has been studied in the vector autoregressive models literature, but not thoroughly applied to the VECM framework. There exists a separation in the literature; permanent shocks are identified with long-run restrictions while transitory shocks are identified with short-run restrictions. This paper's innovation is the identification of permanent shocks using both horizontal restrictions.