VECM Video Tutorial Series

• 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)

Follow this link for a Video on learning objectives and complete information on this Tutorial series: VECM Video Tutorial Series.