Econometric Methods for Modelling Systems With a Mixture of i(1) and i(0) Variables

This paper considers structural models with both I(1) and I(0) variables. The structural shocks associated with either set of variables could be permanent or transitory. We classify the shocks as (P1, P0) and (T1, T0), where P/T distinguishes permanent/transitory, while 1/0 means they are attached t...

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Published inJournal of applied econometrics (Chichester, England) Vol. 31; no. 5; pp. 892 - 911
Main Authors Fisher, Lance A., Huh, Hyeon-Seung, Pagan, Adrian R.
Format Journal Article
LanguageEnglish
Published Chichester Blackwell Publishing Ltd 01.08.2016
Wiley (Variant)
Wiley Periodicals Inc
Subjects
Econometrics
Economic models
Variables
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Summary:This paper considers structural models with both I(1) and I(0) variables. The structural shocks associated with either set of variables could be permanent or transitory. We classify the shocks as (P1, P0) and (T1, T0), where P/T distinguishes permanent/transitory, while 1/0 means they are attached to structural equations with either I(1) or I(0) variables as their ‘dependent’ variable. We show that P0 shocks can affect cointegration analysis and provide a formula to compute the permanent component if they are present. Finally, we reformulate a well-known empirical structural vector autoregression showing the impact of P0 shocks when there are just long-run parametric and sign restrictions.
Bibliography:ark:/67375/WNG-9LPLS6BW-Q
istex:D52B01930BB926EA19C3F898916A53CA362BB910
ArticleID:JAE2459
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 23
ISSN:0883-7252
1099-1255
DOI:10.1002/jae.2459