Linear dynamic equilibrium correction mechanisms are shown to follow from the discretisation of continuous economic processes with steady-state solutions. In addition, the proposed procedure provides testable restrictions on the coefficients of the dynamic econometric model.

Crises in the banking and sovereign debt sectors give rise to heightened financial fragility. Of particular concern is the development of self-fulfilling feedback loops where crisis conditions in one sector are transmitted to the other sector and back again. We use time-varying tests of Granger...

This paper considers the implications of the permanent/transitory decomposition of shocks for identification of structural models in the general case where the model might contain more than one permanent structural shock. It provides a simple and intuitive generalization of the influential work...

This paper considers the implications of the permanent/transitory decomposition of shocks for identification of structural models in the general case where the model might contain more than one permanent structural shock. It provides a simple and intuitive generalization of the influential work...