Document Type
Discussion Paper
Publication Date
10-1-1991
CFDP Number
1003
CFDP Pages
11
Abstract
Reduced rank regression procedures in error correction models (ECM’s) permit consistent estimation of the cointegration space but do not provide consistent estimates of individual structural relations when the dimension of the cointegration space is greater than one. Indeed, individual structural cointegrating equations are unidentified without additional a priori restrictions, just as in the conventional simultaneous equations framework. The effect of this lack of identification is explored by considering the distributions and limit distributions of reduced rank regression estimates of unidentified components of the cointegrating matrix in a typical VAR formulation of the ECM. Some recommendations are made for empirical practice.
Recommended Citation
Phillips, Peter C.B., "Unidentified Components in Reduced Rank Regression Estimation of ECM's" (1991). Cowles Foundation Discussion Papers. 1246.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1246