Hi! How do I interpret beta and aplha in VECM? I know alpha is the adjustment to equilibrium, and that a significant and negative coefficient of alpha shows that the variable is "caused" by the other variable. But how do I interpret when beta (cointegrating equation) is significant with one variable or another? Or both? I have 2 vectors.
You'll find the following textbook written by Chris Brooks very useful in this regard.
http://rum.prf.jcu.cz/public/mecirova/eng_ekonomka/Chris_Brooks_Introductory_Econometrics_for_Fina.pdf
Good luck
Thanks, always good to have an other econometrics book to consult. However, I was kind of hoping for a quick and easy answer. :)
For more than one cointegrating vector (i.e multiple eqilibria) "alphas" show how the the short run dynamic, the system move between the equlibria. So it can happen in one of the equilibrium a variable is significant in the other it is not.
Said that, I guess this is your homework, please look at textbooks. You will learn not just earn marks
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