To examine the multivariate relationship between the variables, this study employs the vector error correction model (VECM
Results of the VECM
for [DELTA][cpi.sub.t], as a dependent variable depict the short run dynamics.
As noted by Escribano (2004), the linear properties of the error correction process might be restrictive, since the elements of the VECM
are assumed to be constant, implying on a unique long-run equilibrium.
Aslam (2016) exploited Johansen cointegration technique and Vector Error Correction Model (VECM
) as the estimation technique using annual time series data spanning from 1959 to 2013.
Due to some undesirable properties of Engle-Granger test in multivariate regression we also estimated money demand function including asset prices as Vector Error Correction Model (VECM
) and tested cointegration using Johansen test.
Porem, serao utilizadas 2 defasagens, em vez de 1, pois a analise VECM
consome uma defasagem para calcular a primeira diferenca das variaveis de entrada.
By including a long-term relation to (1), VECM
is obtained in the following form:
Formula (6) is the vector error correction model (VECM
), in which each equation is an error correction model.