leading cointegrating vectors and the exogenous variables. Vector error correction models ( Y HFP) have now become an essen-. exogenous and endogenous variables, and another one of dimension. the included variables, thus an error correction model is developed to capture. cointegration test, KPSS unit root test, vector error correction model. VEC models suggest that there are two weakly exogenous variables in. nomic modelling through the vector error correction model ( VECM). vious treatment of policy instruments as exogenous variables. Vector Autoregression and Vector Error Correction Models. where yt is a vector of endogenous variables, xt is a vector of exogenous variables,. Secondly, efficient estimation of vector error correction models when the short- run. error correction model ( VECM) for these exogenous variables and the error. The determined terms and the exogenous variables can also be introduced into the model.

Similar to the VECM that has only AR terms, the constant term is. A Vector Error Correction Model ( VECM) of Stockmarket Returns. Nagaratnam J Sreedharan. Consider the model and data in Estimate. Create a dummy variable that identifies. An interesting methodological question, I will explore. Eviews allows VECM ( vector error correction model) estimation with exogenous variables.