Research Discussion Papers, Bank of Finland
No 6/2008:
Cointegration implications of linear rational expectation models
Mikael Juselius ()
Abstract: This paper derives the cointegration spaces that are
implied by linear rational expectations models when data are I(1). The
cointegration implications are easy to calculate and can be readily applied
to test if the models are consistent with the long-run properties of the
data. However, the restrictions on cointegration only form a subset of all
the cross-equation restrictions that the models place on data. The approach
is particularly useful in separating potentially data-consistent models
from the remaining models within a large model family. Moreover, the
approach provides useful information on the empirical shock structure of
the data.
Keywords: rational expectations; cointegration; (follow links to similar papers)
JEL-Codes: C52; (follow links to similar papers)
25 pages, March 11, 2008
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