Most of the empirical literature inappropriately applies Hendry’s (1995) mean lag formula – which he derived for first order autoregressive distributed lag models under the assumption of a homogeneous long-run equilibrium – to error correction models that have complex lag structures and lack long-run homogeneity. We derive an expression for the mean lag in general error correction models without imposing the assumption of a homogeneous equilibrium. In addition, we quantify the bias due to the incorrect use of Hendry’s (1995) formula.

Mean lag in general error correction models / Fuleki, Peter; Ventura, Luigi. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - STAMPA. - 143:(2016), pp. 107-110. [10.1016/j.econlet.2016.03.028]

Mean lag in general error correction models

VENTURA, Luigi
2016

Abstract

Most of the empirical literature inappropriately applies Hendry’s (1995) mean lag formula – which he derived for first order autoregressive distributed lag models under the assumption of a homogeneous long-run equilibrium – to error correction models that have complex lag structures and lack long-run homogeneity. We derive an expression for the mean lag in general error correction models without imposing the assumption of a homogeneous equilibrium. In addition, we quantify the bias due to the incorrect use of Hendry’s (1995) formula.
2016
mean lag; autoregressive distributed lag model; error correction model
01 Pubblicazione su rivista::01a Articolo in rivista
Mean lag in general error correction models / Fuleki, Peter; Ventura, Luigi. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - STAMPA. - 143:(2016), pp. 107-110. [10.1016/j.econlet.2016.03.028]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/954757
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