Cointegration and Adjustment in the Infinite Order CVAR Representation of Some Partially Observed CVAR(1) Models | Zendy

Søren Johansen | Zendy

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Cointegration and Adjustment in the Infinite Order CVAR Representation of Some Partially Observed CVAR(1) Models

Author(s) -

Søren Johansen

Publication year - 2018

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.3180010

Subject(s) - cvar , cointegration , representation (politics) , order (exchange) , econometrics , economics , mathematics , expected shortfall , financial economics , finance , law , political science , portfolio , politics

A multivariate CVAR(1) model for some observed variables and some unobserved variables is analysed using its infinite order CVAR representation of the observations. Cointegration and adjustment coefficients in the infinite order CVAR are found as functions of the parameters in the CVAR(1) model. Conditions for weak exogeneity of the cointegrating vectors in the approximating finite order CVAR are derived. The results are illustrated by a few simple examples of relevance for modelling causal graphs.

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