Permanent-transitory decompositions under weak exogeneity | Macquarie University ResearchOnline

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Title: Permanent-transitory decompositions under weak exogeneity
Related: Econometric theory, Vol. 23, Issue 1, p.183-189
DOI: 10.1017/S0266466607070077
Publisher: Cambridge University Press
Date: 2007
FoR/RFCD Code(s): 140300 Econometrics
Author/Creator: Fisher, Lance A
Author/Creator: Huh, Hyeon-seung
Description: This note shows that the orthogonal shocks obtained by imposing a recursive structure on the contemporaneous impacts of the errors in a vector-error correction model (VECM) are related to the orthogonal permanent-transitory shocks in a Gonzalo and Ng (2001, Journal of Economic Dynamics and Control 25, 1527–1546) decomposition provided some of the variables in the system are weakly exogenous. Specifically, when there are as many weakly exogenous variables as common trends and the weakly exogenous variables are ordered first, the orthogonal shocks obtained directly from the VECM constitute a permanent-transitory decomposition, and the permanent shocks are identical to those in the Gonzalo and Ng decomposition.
Description: 7 page(s)
Subject Keyword: 140300 Econometrics
Resource Type: journal article
Organisation: Macquarie University. Dept. of Economics

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