We conclude 3 cointegration vectors at 5% level of significance. The normalised
cointegration vectors are presented in table 6.
Table 6. Normalized cointegrating coefficients
lnPPI |
lnIPI |
InXREURO |
lnM1A |
TREND |
1.000000 |
0.000000 |
0.000000 |
0.100722 |
0.000237 |
(0.40240)a |
(0.00539) | |||
0.000000 |
1.000000 |
0.000000 |
0.432500 |
-0.003577 |
(0.12665) |
(0.00170) | |||
0.000000 |
0.000000 |
1.000000 |
-0.648281 |
0.008627 |
(0.12772) |
(0.00171) |
a standard errors in parentheses
The money slope coefficients are rather surprisingly negative for the industrial and
agricultural prices and positive for the exchange rate equation, not being statistically
significant in the agricultural price equation. The linear trend is significant in the industrial
prices and exchange rate equations, but not in the agricultural prices equation.
The money neutrality hypothesis expects the coefficients associated with the money supply
(lnM1A) to be close to one (i.e. the long run increase in the agricultural, industrial and
services prices to be unit proportional with the increase in the money supply). The lnM1A
coefficients with respect to the prices are 0.100, 0.432, -0.648, not supporting the money
neutrality hypothesis.
4.3. VECM model
Because the variables proved to be cointegrated, a Vector Error Correction Model is
appropriate to simultaneously depict the long and short run evolution of the system. The
residuals of the long run cointegrating equations are used to construct the VECM in table 7.
12
More intriguing information
1. Cryothermal Energy Ablation Of Cardiac Arrhythmias 2005: State Of The Art2. Are Japanese bureaucrats politically stronger than farmers?: The political economy of Japan's rice set-aside program
3. The name is absent
4. EXECUTIVE SUMMARIES
5. Beyond Networks? A brief response to ‘Which networks matter in education governance?’
6. The name is absent
7. MICROWORLDS BASED ON LINEAR EQUATION SYSTEMS: A NEW APPROACH TO COMPLEX PROBLEM SOLVING AND EXPERIMENTAL RESULTS
8. The migration of unskilled youth: Is there any wage gain?
9. Death as a Fateful Moment? The Reflexive Individual and Scottish Funeral Practices
10. THE USE OF EXTRANEOUS INFORMATION IN THE DEVELOPMENT OF A POLICY SIMULATION MODEL