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Identification when data are nonstationary
• p(p-1) just identifying restrictions on the short-run parameters (equations)• r(r-1) just identifying restrictions on the long-run parameters (relations)
Three different aspects
Identifying restrictions
Generic identification:1.
2.
Just-, over-, and under-identification
Correct:
Incorrect:
Imposing restrictions on all cointegrating relations
The switching algorithm
Normalization:
Interpretation as the long-run reduced formExogeneity assumptions and the Phillips triangular form model
Example:
Just identitified cointegration relations
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