Am 27.04.2018 um 20:28 schrieb lasses skola:Hi! I have a question regarding VECM and IRF interpretation in Gretl.
Hi, to be clear, this is not about an interpretation _in Gretl_, it's a more generic question, there's nothing gretl specific here.
Which -I presume- is why no answers have followed so far.According to the speed of adjustment coefficient in the VEC, the target variable adjusts at a speed of 15,5% per year to equilibrium. But the IRF says that the cumulative change in the target variable is only 2% from year four trough the time horizon of the IRF, which is nine years. How can I interpret this?
This is a system there is no such thing as *the* target variable.
Apart from that, the two magnitudes have very little in common. You could have a case where the first variable is not reacting/adjusting at all to disequilibria, and still you could get a long-run permanent effect because of the other dynamics.
cheers,
sven
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