Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. An error correction model is a dynamical system with the characteristics that the deviation of the current state from its long-run relationship will be fed into its short-run dynamics. An error correction model is not a model that corrects the error in another model. A rough long-r ...Full description
Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. An error correction model is a dynamical system with the characteristics that the deviation of the current state from its long-run relationship will be fed into its short-run dynamics. An error correction model is not a model that corrects the error in another model. A rough long-run relationship can be determined by the cointegration vector, and then this relationship can be utilized to develop a refined dynamic model which can have a focus on long-run or transitory aspect such as the two VECM of a usual VAR in Johansen test.Vector error correction model is adding error correction feature to a multi-factor model such as a vector autoregression model.