Submodel Estimation of a Structural Vector Error Correction Model

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Horrace, William C
vector error correction model; conintegration; limited information maximum liklihood; counterfactual policy analysis; Economics
article description
In this paper we derive the concentrated likelihood function of a mutually independent subsystem (submodel) of equations from a p-dimensional vector error component model under cointegration. The structural estimates of the subsystem parameters are identified by exclusion restrictions. The maximum likelihood estimates may be useful for counterfactual policy analysis.