Error correction models are widely used to estimate dynamic cointegrated systems. In most applications error correction models are reduced form models. As a result, non-structural speed of adjustment coefficients are estimated in these applications. A single equation instrumental variable method...

When univariate methods are applied to real exchange rates, point estimates of autoregressive coefficients typically imply very slow rates of mean reversion. Rogoff (1996) discusses that the remarkable consensus of 3-5 year half-lives of purchasing power parity (PPP) deviations is found among...

This paper develops a system instrumental variable method to estimate the speed of adjustment coefficient in the long-run equilibrium of structural error correction models for a class of linear rational expectations models. This method is applied to an exchange rate model with sticky prices, in...