In this paper we derive the concentrated likelihood function of a mutually independent subsystem (submodel) of equations from a p-dimensional vector error component model under cointegration. The structural estimates of the subsystem parameters are identified by exclusion restrictions. The maximum likelihood estimates may be useful for counterfactual policy analysis.
- Counterfactual policy analysis
- Limited information maximum likelihood
- Vector error correction model
ASJC Scopus subject areas
- Economics and Econometrics