The RATS Software Forum

Dear all

I am looking for a VECM model code, including long- and short-run restrictions to find the role of permanent and temporary shocks in macro time series. My reference is Issler and Vahid (2001)https://www.sciencedirect.com/science/a ... 3201000526 (https://econpapers.repec.org/article/ee ... 49-475.htm). They extend King, Plosser, Stock and Watson (1991) (https://econpapers.repec.org/article/ae ... 819-40.htm ) who use US macro time series but just including long-run restrictions (There is a code for this last article)

I appreciate your help

The ShortAndLongVECM.rpf example shows how to handle a VECM with short and long run restrictions on the SVAR. There's a thread on the topic in the forum at https://estima.com/forum/viewtopic.php?f=4&t=730.

Tom, thanks for your suggestion

Now, I am trying to figure out the algebra of the following statement "For the one-quarter horizon, trend innovations are the first differences of the common trend,
while cyclical innovations are the residuals obtained by regressing cycles on the right-hand side variables in the VECM (the lagged error-correction terms and the eight first lags of the dependent variables). For longer horizons, we accumulate trend shocks to get trend innovations and use higher lags of the information set to obtain the cyclical innovations."
(Issler and Vahid (2001))
Do you have in mind any reference? Thanks again

Wouldn't that be Vahid and Engle? BTW, contrary to what I said before, this has nothing to do with the short-and-long restrictions on a VECM, which is for doing a structural model of the contemporaneous relationships---they're doing common (short-run) cycles, which are dynamic restrictions.

Specifically, it is Issler and Vahid (2001) "Common cycles and the importance of transitory shocks to macroeconomic aggregates" JME. Extending King, R.G., Plosser, C.I., Stock, J.H., Watson, M.W., 1991. Stochastic trends and economic
fluctuations, they include common-trend and common-cycle restrictions in a VECM (X(y,c,i)) to find the role of the permanent shocks on y, c, and, i, son my question was about if there is any reference (and RATS instructions) about the algebra of it.

Thanks Tom