🌿Vector Error Correction Model (VECM) | Cointegration, ECM Derivation & Intuition🌿
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🌿Vector Error Correction Model (VECM) | Cointegration, ECM Derivation & Intuition🌿
In this lecture, we derive and explain the Vector Error Correction Model (VECM) from a dynamic time-series framework. We show how cointegrated I(1) variables can be modeled in a way that captures both short-run dynamics and long-run equilibrium relationships. Starting from a dynamic regression, we: Derive the Error Correction Model (ECM) step ...
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