Speed of adjustment in cointegrated systems

This paper discusses summary measures for the speed of adjustment in possibly cointegrated Vector Autoregressive Processes (VAR). In particular we propose long-run half-lives, based on interim and total multipliers. We discuss their relation with Granger-noncausality and other types of half-life, which are shown to convey different information, except in the univariate AR(1) case. We present likelihood-based inference on long-run half-lives, regarded as discrete functions of parameters in the VAR model. It is shown how asymptotic confidence regions can be defined. An empirical illustration concerning speed of adjustment to purchasing-power parity is provided.