Bootstrapping the Error Correction Model Cointegration Test

This paper is concerned with using the bootstrap to obtain improved critical values for the error correction model (ECM) cointegration test in dynamic models. In the paper we investigate the effects of dynamic specification on the size and power of the ECM cointegration test with bootstrap critical values. The results from a Monte Carlo study show that the size of the bootstrap ECM cointegration test is close to the nominal significance level. We find that overspecification of the lag length results in a loss of power. Underspecification of the lag length results in size distortion. The performance of the bootstrap ECM cointegration test deteriorates if the correct lag length is not used in the ECM. The bootstrap ECM cointegration test is therefore not robust to model misspecification.

A multiple error-correction model of housing supply

This paper considers supply dynamics in the context of the Irish residential market. The analysis, in a multiple error-correction framework, reveals that although developers did respond to disequilibrium in supply, the rate of adjustment was relatively slow. In contrast, however, disequilibrium in demand did not impact upon supply, suggesting that inelastic supply conditions could explain the prolonged nature of the boom in the Irish market. Increased elasticity in the later stages of the boom may have been a contributory factor in the extent of the house price falls observed in recent years.

Does mixed frequency vector error correction model add relevant information to exchange misalignment calculus? Evidence for United States

Real exchange rate is an important macroeconomic price in the economy and a ects economic activity, interest rates, domestic prices, trade and investiments ows among other variables. Methodologies have been developed in empirical exchange rate misalignment studies to evaluate whether a real e ective exchange is overvalued or undervalued. There is a vast body of literature on the determinants of long-term real exchange rates and on empirical strategies to implement the equilibrium norms obtained from theoretical models. This study seeks to contribute to this literature by showing that it is possible to calculate the misalignment from a mixed ointegrated vector error correction framework. An empirical exercise using United States' real exchange rate data is performed. The results suggest that the model with mixed frequency data is preferred to the models with same frequency variables

Pricing-to-market using EGARCH-error correction model

In this paper, the authors use an exponential generalized autoregressive conditional heteroscedastic (EGARCH) error-correction model (ECM), that is, EGARCH-ECM, to estimate the pass-through effects of foreign exchange (FX) rates and producers’ prices for 20 U.K. export sectors. The long-run adjustment of export prices to FX rates and producers’ prices is within the range of -1.02% (for the Textiles sector) and -17.22% (for the Meat sector). The contemporaneous pricing-to-market (PTM) coefficient is within the range of -72.84% (for the Fuels sector) and -8.05% (for the Textiles sector). Short-run FX rate pass-through is not complete even after several months. Rolling EGARCH-ECMs show that the short and long-run effects of FX rate and producers’ prices fluctuate substantially as are asymmetry and volatility estimates before equilibrium is achieved.

Vector Error-Correction Models in a consumer packaged goods category forecasting decision support system

A framework for developing marketing category management decision support systems (DSS) based upon the Bayesian Vector Autoregressive (BVAR) model is extended. Since the BVAR model is vulnerable to permanent and temporary shifts in purchasing patterns over time, a form that can correct for the shifts and still provide the other advantages of the BVAR is a Bayesian Vector Error-Correction Model (BVECM). We present the mechanics of extending the DSS to move from a BVAR model to the BVECM model for the category management problem. Several additional iterative steps are required in the DSS to allow the decision maker to arrive at the best forecast possible. The revised marketing DSS framework and model fitting procedures are described. Validation is conducted on a sample problem.

Operator quantum error correction

This paper is an expanded and more detailed version of the work [1] in which the Operator Quantum Error Correction formalism was introduced. This is a new scheme for the error correction of quantum operations that incorporates the known techniques - i.e. the standard error correction model, the method of decoherence-free subspaces, and the noiseless subsystem method - as special cases, and relies on a generalized mathematical framework for noiseless subsystems that applies to arbitrary quantum operations. We also discuss a number of examples and introduce the notion of unitarily noiseless subsystems.

Automated error correction of business process models

As order dependencies between process tasks can get complex, it is easy to make mistakes in process model design, especially behavioral ones such as deadlocks. Notions such as soundness formalize behavioral errors and tools exist that can identify such errors. However these tools do not provide assistance with the correction of the process models. Error correction can be very challenging as the intentions of the process modeler are not known and there may be many ways in which an error can be corrected. We present a novel technique for automatic error correction in process models based on simulated annealing. Via this technique a number of process model alternatives are identified that resolve one or more errors in the original model. The technique is implemented and validated on a sample of industrial process models. The tests show that at least one sound solution can be found for each input model and that the response times are short.

Network Error Correction for Unit-Delay, Memory-Free Networks Using Convolutional Codes

A single source network is said to be memory-free if all of the internal nodes (those except the source and the sinks) do not employ memory but merely send linear combinations of the symbols received at their incoming edges on their outgoing edges. In this work, we introduce network-error correction for single source, acyclic, unit-delay, memory-free networks with coherent network coding for multicast. A convolutional code is designed at the source based on the network code in order to correct network- errors that correspond to any of a given set of error patterns, as long as consecutive errors are separated by a certain interval which depends on the convolutional code selected. Bounds on this interval and the field size required for constructing the convolutional code with the required free distance are also obtained. We illustrate the performance of convolutional network error correcting codes (CNECCs) designed for the unit-delay networks using simulations of CNECCs on an example network under a probabilistic error model.

Forecasting the spot prices of various coffee types using linear and non-linear error correction models

Este documento estima modelos lineales y no-lineales de corrección de errores para los precios spot de cuatro tipos de café. En concordancia con las leyes económicas, se encuentra evidencia que cuando los precios están por encima de su nivel de equilibrio, retornan a éste mas lentamente que cuando están por debajo. Esto puede reflejar el hecho que, en el corto plazo, para los países productores de café es mas fácil restringir la oferta para incrementar precios, que incrementarla para reducirlos. Además, se encuentra evidencia que el ajuste es más rápido cuando las desviaciones del equilibrio son mayores. Los pronósticos que se obtienen a partir de los modelos de corrección de errores no lineales y asimétricos considerados en el trabajo, ofrecen una leve mejoría cuando se comparan con los pronósticos que resultan de un modelo de paseo aleatorio.

Bayesian estimation and selection of nonlinear vector error correction models: The case of the sugar-ethanol-oil nexus in Brazil

Nonlinear adjustment toward long-run price equilibrium relationships in the sugar-ethanol-oil nexus in Brazil is examined. We develop generalized bivariate error correction models that allow for cointegration between sugar, ethanol, and oil prices, where dynamic adjustments are potentially nonlinear functions of the disequilibrium errors. A range of models are estimated using Bayesian Monte Carlo Markov Chain algorithms and compared using Bayesian model selection methods. The results suggest that the long-run drivers of Brazilian sugar prices are oil prices and that there are nonlinearities in the adjustment processes of sugar and ethanol prices to oil price but linear adjustment between ethanol and sugar prices.

A physics-based correction model for homogenizing sub-daily temperature series

A new physics-based technique for correcting inhomogeneities present in sub-daily temperature records is proposed. The approach accounts for changes in the sensor-shield characteristics that affect the energy balance dependent on ambient weather conditions (radiation, wind). An empirical model is formulated that reflects the main atmospheric processes and can be used in the correction step of a homogenization procedure. The model accounts for short- and long-wave radiation fluxes (including a snow cover component for albedo calculation) of a measurement system, such as a radiation shield. One part of the flux is further modulated by ventilation. The model requires only cloud cover and wind speed for each day, but detailed site-specific information is necessary. The final model has three free parameters, one of which is a constant offset. The three parameters can be determined, e.g., using the mean offsets for three observation times. The model is developed using the example of the change from the Wild screen to the Stevenson screen in the temperature record of Basel, Switzerland, in 1966. It is evaluated based on parallel measurements of both systems during a sub-period at this location, which were discovered during the writing of this paper. The model can be used in the correction step of homogenization to distribute a known mean step-size to every single measurement, thus providing a reasonable alternative correction procedure for high-resolution historical climate series. It also constitutes an error model, which may be applied, e.g., in data assimilation approaches.

Development of error correction techniques for nitrate-N load estimation models

Excess nutrient loads carried by streams and rivers are a great concern for environmental resource managers. In agricultural regions, excess loads are transported downstream to receiving water bodies, potentially causing algal blooms, which could lead to numerous ecological problems. To better understand nutrient load transport, and to develop appropriate water management plans, it is important to have accurate estimates of annual nutrient loads. This study used a Monte Carlo sub-sampling method and error-corrected statistical models to estimate annual nitrate-N loads from two watersheds in central Illinois. The performance of three load estimation methods (the seven-parameter log-linear model, the ratio estimator, and the flow-weighted averaging estimator) applied at one-, two-, four-, six-, and eight-week sampling frequencies were compared. Five error correction techniques; the existing composite method, and four new error correction techniques developed in this study; were applied to each combination of sampling frequency and load estimation method. On average, the most accurate error reduction technique, (proportional rectangular) resulted in 15% and 30% more accurate load estimates when compared to the most accurate uncorrected load estimation method (ratio estimator) for the two watersheds. Using error correction methods, it is possible to design more cost-effective monitoring plans by achieving the same load estimation accuracy with fewer observations. Finally, the optimum combinations of monitoring threshold and sampling frequency that minimizes the number of samples required to achieve specified levels of accuracy in load estimation were determined. For one- to three-weeks sampling frequencies, combined threshold/fixed-interval monitoring approaches produced the best outcomes, while fixed-interval-only approaches produced the most accurate results for four- to eight-weeks sampling frequencies.

Error correction in second language writing : teachers’ beliefs, practices, and students’ preferences

Error correction is perhaps the most widely used method for responding to student writing. While various studies have investigated the effectiveness of providing error correction, there has been relatively little research incorporating teachers' beliefs, practices, and students' preferences in written error correction. The current study adopted features of an ethnographic research design in order to explore the beliefs and practices of ESL teachers, and investigate the preferences of L2 students regarding written error correction in the context of a language institute situated in the Brisbane metropolitan district. In this study, two ESL teachers and two groups of adult intermediate L2 students were interviewed and observed. The beliefs and practices of the teachers were elicited through interviews and classroom observations. The preferences of L2 students were elicited through focus group interviews. Responses of the participants were encoded and analysed. Results of the teacher interviews showed that teachers believe that providing written error correction has advantages and disadvantages. Teachers believe that providing written error correction helps students improve their proof-reading skills in order to revise their writing more efficiently. However, results also indicate that providing written error correction is very time consuming. Furthermore, teachers prefer to provide explicit written feedback strategies during the early stages of the language course, and move to a more implicit strategy of providing written error correction in order to facilitate language learning. On the other hand, results of the focus group interviews suggest that students regard their teachers' practice of written error correction as important in helping them locate their errors and revise their writing. However, students also feel that the process of providing written error correction is time consuming. Nevertheless, students want and expect their teachers to provide written feedback because they believe that the benefits they gain from receiving feedback on their writing outweigh the apparent disadvantages of their teachers' written error correction strategies.