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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 16, No. 1, pp.71-80
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2003
Received 22 Nov 2003 Revised 20 Feb 2004

Measuring the Length of Period for the Long-Run Equilibrium in a Cointegration Relation

Jae-Young Kim
Associate Professor, School of Economics, Seoul National University, San 56-1 Shilim-dong Kwanak-gu, Seoul 151-742, Korea, Tel: +82-2-880-6390 jykim017@snu.ac.kr

JEL Classification: C1, C22, C5

Abstract

In economics the period of “long-run” often signifies the length of time within which transient fluctuations disappear, and a system comes back to an equilibrium state (or path). Among some interesting cases of long run analysis, the concept of cointegration is a relatively new concept of the long run equilibrium. This paper discusses how to determine the length of the long-run period for a cointegration relation. In an application to a consumption-income relation for three countries, U.S., Germany and Japan, we found that the length of the long-run period for the relation for these countries is about two to three years.

Keywords:

Long run equilibrium, Cointegration, Consumption-income relation

Acknowledgments

The author thanks the editor and anonymous referees for valuable comments. Financial supports from Seoul National University Foundation and a BK21 Program of Korea Research Foundation are greatly appreciated. Thanks also go to Joo-Hee Oh for assistance in editing the final draft of the paper in a word file.

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