Time Series: Error Correction Model explained in Eviews

EViews tutorial: Error Correction Model explained in Eviews Step by Step! Hello Everyone! By watching the video "Time Series: Error Correction Model explained", you will learn how to estimate error correction model in eviews step by step and interpret the results. An error correction model is estimated after having determined cointegration among the variables in the model.

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Ensure to watch the 1st Video: "Cointegration - Engle and Granger method in EViews".

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🗂Video Material:

📈Critical Values Table for Cointegration:

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📚Recommended Literature:

📚Yule (1926): Why do we Sometimes get Nonsense-Correlations between Time-Series?- A Study in Sampling and the Nature of Time-Series

📚 Granger and Newbold (1974): Spurious Regressions in Econometrics

📚 Engle and Granger (1987): Co-Integration and Error Correction: Representation, Estimation, and Testing
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Time Stamps

Introduction 0:00
ECM Overview 0:37
Error Correction Term Details 1:48
Estimating the ECM 3:12
Long and Short Run Model 5:09
Model Diagnostics 7:30
In Sample Forecast 11:32
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[JDEconomics]

Hello Everyone! Thanks for watching! Part 2 of the tutorial is here! I hope you enjoy it.

IMPORTANT: To clarify, if your Error Correction Term is positive (instead of negative), it means your model will not converge to an equilibrium. The disequilibrium will be permanent.


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✅Ensure to watch the 1st Video: "Cointegration - Engle and Granger method in EViews".

I wish you good luck on your research and courses!

JDEconomics.

[yasamanmatin]

I went through over 15 videos on YouTube and read around 20 articles and many other academic resources about this subject, I can confidently say that this video is a life saveeer and much better than all the unnecessary materials I went through .

[kimiyamaleki]

thank you so much this clip was great and so helpful for students like me who want to handle their thesis!😀

[pawalucious]

This is a master class. I am looking forward to you doing a video on the ARDL. Am sure it will be superb like the rest of your videos

[NaseerKhan-gi]

i appreciated again, but explain forcasting model in technical and theortical aspects in great detail.

[talhachoudhry]

Sir. I'm very happy with your teaching.

[procrastinomancer]

Hello JD! This is awesome. Just one question, is there supposed to be a constant in a differenced regression? I would have thought that since constants are the same across periods, they would be deleted out.

[thetruthsreality]

Excellent explanation, very well done! Hope will have more videos on econometric models, with more than two variables and in R software.

[IrfanullahSahibzada-vd]

Sir I am confused about when ECM model got estimated then how to forecast for the specific dependent variable while ECM independent term residuals are not available for the forecast period.

[arlertarm]

I am studying price dynamics between retail and farmgate prices. What if the sign of the long run and short run adjustments are different? Also, what if the short run adjustment is not significant but the ect is negative and significant? I hope I can show you my data and results cause I badly need help on this one.

[vikram]

Thank You Sir. The video is very informative . Can you please make a video explaining Johannsen Co-integration test and VECM

[aminaahmedalibelal]

very good explanation sir. is it possible to run the ECT when all variables are I(0)?

[federicolirosi]

Hi! Great video! I´ve got a question, though. What if I get a statistical significant relationship in the long run but not in the short run (ETC is statistical significant and the values are as expected, but for example imports shows to be only significant in the long run not in the short run)

[NaseerKhan-gi]

Great work and i appreciated you alot, however, plz, further explain my argument in detail: like what would be the intercept value ?i.e, alpha = 0, alpha > 0 or alpha <0 . as i read many articles that the intercep coefficinet value should be 0 and thier p value should be greater than > .01, >.05 and >.10. so, if this is the case, then it means, that the model is stable and valid.explain? example CAPM, FF3FM, FF4FM, FF5FM and FF6FM.

[thetruthsreality]

How is the written short-term equation in case of more than 2 variables, should the number of ECT estimated coefficients be the same as the number of analyzed variables in the equation?

[hendelebiary]

Hi Sir, thank you so much for your constructive tutorial. Can you make a video for cointegration bound test applying the ARDL model in Error Correction form showing the estimation for both the long run and Short run error correction model using E-views. Thanks

[mohamedhame]

Hello I am just wondering about the variables we just take it in difference or we should determine how many lages we should use? Tankes

[samfisher]

hello i just wanna ask again, will the result differ if i exchange the dependent and independent variables? what does it mean if it shows that it is cointegrated with significant ect when variable a is used as dependent variable but the results differ when i used variable b as the dependent variable?

[dinaoktavia]

Thank you for your explanation video, sir. It's really helpful for my thesis. But, I have little troubles here.
1) What can I do, if the model doesn't fulfill normality assumption? And how can I fix this?
2) the ECT value is positive instead of negative, does it mean I have to re-estimate my model?
Thank you very much for your answer and help.

[stochasticNerd]

Sir, initially your short run model (ECM) had some variables in differenced form but at 5:10 minute in the video you are writing short term model with all variables in levels. Could you please explain what happened there?