Short-Run Parameter Changes in a Cointegrated Vector Autoregressive Model.

A family of cointegrated vector autoregressive models with adjusted short-run dynamics is introduced.\nThese models can describe evolving short-run dynamics in a more flexible way than standard vector\nautoregressions, and yet likelihood analysis is based on reduced rank regression using conventional\nasymptotic tables. The family of dynamics-adjusted vector autoregressions consists of three models: a\nmodel subject to short-run parameter changes, a model with partial short-run dynamics and a model\nwith short-run explanatory variables. An empirical illustration using US gasoline prices is presented,\ntogether with some simulation experiments.