Cointegration implications of linear rational expectation models

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Title: Cointegration implications of linear rational expectation models
Author: Juselius, Mikael
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
Series number: 6/2008
Year of publication: 2008
Publication date: 8.2.2008
Pages: 24 s.
Keywords: rationaaliset odotukset; mallit;
JEL: C52
Abstract: This paper derives the cointegration spaces that are implied by linear rational expectations models when data are I(1). The cointegration implications are easy to calculate and can be readily applied to test if the models are consistent with the long-run properties of the data. However, the restrictions on cointegration only form a subset of all the cross-equation restrictions that the models place on data. The approach is particularly useful in separating potentially data-consistent models from the remaining models within a large model family. Moreover, the approach provides useful information on the empirical shock structure of the data. Keywords: rational expectations, cointegration JEL classification numbers: C52

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