Cointegration and Error Correction Mechanisms for Singular Stochastic Vectors

Cointegration and Error Correction

1 The Background Elementary courses in statistics introduce at an early stage the key assumption of “random sampling”. In more technical language, the data set is assumed to be identically and independently distributed (i.i.d.). In this framework a range of simple and elegant results can be derived, for example, that the variance of the mean of n observations is 1/n times the variance of the ob...

Not Just for Cointegration: Error Correction Models with Stationary Data

The error correction model is generally thought to be isomorphic to integrated data and the modeling of cointegrated processes, and as such, is considered inappropriate for stationary data. Given that many political time series are not integrated, analysts are unable to take advantages of the error correction model’s ability to capture both long and short-term dynamics in a single statistical m...

Testing for Cointegration in Nonlinear STAR Error Correction Models

In this paper we propose a new testing procedure to detect the presence of a cointegrating relationship that follows a globally stationary smooth transition autoregressive (STAR) process. We start from a general VAR model, embed the STAR error correction mechanism (ECM) and then derive the generalised nonlinear STAR error correction model. We provide two operational versions of the tests. First...

Stochastic dominant singular vectors method for variation-aware extraction Citation

In this paper we present an efficient algorithm for variation-aware interconnect extraction. The problem we are addressing can be formulated mathematically as the solution of linear systems with matrix coefficients that are dependent on a set of random variables. Our algorithm is based on representing the solution vector as a summation of terms. Each term is a product of an unknown vector in th...

Estimating And Forecasting Demand For Broad Money In Iran Through Cointegration Analysis And Stochastic Simulation