Error Correction and Long-Run Equilibrium in Continuous Time

P. C. B. Phillips

139 citations0/0 files storedEconometrica

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Abstract

This paper deals with error correction models (ECM's) and cointegrated systems that are formulated in continuous time. Problems of representation, identification, estimation and time aggregation are discussed. It is shown that every ECM in continuous time has a discrete time equivalent model in ECM format. Moreover, both models may be written as triangular systems with stationary errors. This formulation simplifies both the continuous and the discrete time ECM representations and it helps to motivate a class of optimal inference procedures. It is further shown that long run equilibria in the continuous system are always identified in the discrete time reduced form, so that there is no aliasing problem for these coefficients.

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References

1990Statistical Inference in Instrumental Variables Regression with I(1) Processes 1987Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors 1986Multiple Time Series Regression with Integrated Processes

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