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→Engle and Granger 2-step approach: Demanded clarification Tags: Mobile edit Mobile web edit |
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: <math> A(L) \, \Delta y_t = \gamma + B(L) \, \Delta x_t + \alpha (y_{t-1} -\beta_0 - \beta_1 x_{t-1} ) + \nu_t. </math>
[define A and B]
''If'' both variables are integrated and this ECM exists, they are cointegrated by the Engle–Granger representation theorem.
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