Stock Prices, News, and Economic Fluctuations: Comment
44 Pages Posted: 6 Apr 2013
Date Written: January 1, 2013
Beaudry and Portier (American Economoc Review, 2006) propose an identification scheme to study the effects of news shocks about future productivity in Vector Error Correction Models (VECM). This comment shows that their methodology does not have a unique solution, when applied to their VECMs with more than two variables. The problem arises from the interplay of cointegration assumptions and long-run restrictions imposed by Beaudry and Portier (2006).
Keywords: Vector Error Correction Model, long-run restrictions, news shocks
JEL Classification: G12, E32, E44
Suggested Citation: Suggested Citation