VECM: Video Tutorial Series


The aim of the VECM Video Tutorial Series is to make the theory, estimation and interpretation of VECM models clear and accessible to everyone. The tutorials dive deep into the inner workings of VECM using suitable examples and quizzes to make everything easy to understand. The tutorials cover the following topics in detail:

  • Meaning of Cointegration
  • When to use VECM and when not to use it
  • VECM’s relationship with VAR models
  • When to apply VAR and when to apply VECM
  • Specification of VECM Models
  • Johansen Normalization and Identifying Restriction in VECM
  • Understanding the Cointegrating Vector in VECM
  • Understanding the Adjustment Parameters, their correct signs and values in VECM
  • Understanding the long-run equilibrium, short-run disequilibrium and convergence
  • Lag length selection
  • Specification of Constants and Trends in VECM
  • Theory behind the Johansen’s Cointegration Test
  • Application of Johansen’s Test and testing of hypothesis
  • Step-by-step estimation of VECM in R
  • Step-by-step estimation of VECM in Stata
  • Interpretation of VECM results
  • Interpreting the Cointegrating Vector and long-run equilibrium
  • Interpreting the Adjustment Parameters, their signs and values
  • Interpreting the short-run disequilibrium and convergence back to long-run equilibrium
  • Checking for misspecifications and goodness of fit
  • Tests of Autocorrelation and their application
  • Normality Tests and their application
  • Eigenvalue Stability test and its application
  • Determining the stationarity of cointegrating vector
  • Obtaining dynamic forecasts from VECM
  • Understanding, applying and interpreting Impulse Response Functions (IRFs)

Course Instructor

Viren Rehal Viren Rehal Author

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