Re: [Gretl-users] VECM and IRF interpretation
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