A generalized single equation error correction model and its application to quarterly data
Working paper
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Date
1986-12-01Metadata
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- Discussion Papers [1002]
Abstract
In this paper, we specify a class of single equation 'error correction'
models on the basis of a general autoregressive-distributed lag regression
equation with one regressor and a white noise disturbance. This relationship is interpreted in terms of long run trends in the regressor and
regressand and short run deviations from these trends. A parametrization
which is useful for quarterly seasonally unadjusted data is proposed. The
model is estimated by means of a non-linear least squares algorithm.
Empirical results based on Norwegian quarterly national accounts data ,
illustrating the relationship between (i) household consumption and income,
(ii) production and demand in manufacturing, and (iii) capital accumulation
and production in manufacturing - are presented. Some experiences from
forecasting exercises are also reported.