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d. The long-run parameter estimates of the VECM, , has the following form: 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000
d. The long-run parameter estimates of the VECM, , has the following form: 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 B = 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 -0.984151 (0.15466) [-6.36344] -1.032363 (0.01984) [-52.0387] -0.978260 (0.00836) [-117.004] -1.104874 (0.08520) [-12.9675] -1.075952 (0.12167) [-8.84352] Interpret the parameters and explain how these estimates are related to the expectations theory. [4 marks] Do you agree that a VECM allows to capture the short-run dynamics between the interest rates? Explain your answer. [4 marks] e. f. If a VECM with the different interest rates would have a zero rank, what model should we use? [2 marks] [Total of Question 2 = 20 marks] d. The long-run parameter estimates of the VECM, , has the following form: 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 B = 0.000000 0.000000 0.000000 1.000000 0.000000 0.000000 0.000000 0.000000 0.000000 1.000000 -0.984151 (0.15466) [-6.36344] -1.032363 (0.01984) [-52.0387] -0.978260 (0.00836) [-117.004] -1.104874 (0.08520) [-12.9675] -1.075952 (0.12167) [-8.84352] Interpret the parameters and explain how these estimates are related to the expectations theory. [4 marks] Do you agree that a VECM allows to capture the short-run dynamics between the interest rates? Explain your answer. [4 marks] e. f. If a VECM with the different interest rates would have a zero rank, what model should we use? [2 marks] [Total of Question 2 = 20 marks]
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