What is Error Correction Model

1.

A short-run model that incorporates a mechanism which restores a variable to its long-term relationship from a disequilibrium position. Learn more in: Analysis of Non-Stationary Time-Series Business Data

2.

When the KPIs are cointegrated, there must be an ECM that describes the short run dynamics of the cointegrated variables towards their long run equilibrium values. Learn more in: Empirical Verification of the Performance Measurement System

3.

ECM links the long-run equilibrium relationship between two time series implied by cointegration with the short-run dynamic adjustment mechanism. Learn more in: Dynamic Relationship between Stock Prices and Exchange Rates in Emerging Markets: Evidence from Fragile Five Economies

4.

When the KPIs are cointegrated, there must be an ECM that describes the short run dynamics of the cointegrated variables towards their long run equilibrium values. Learn more in: Empirical Verification of the Performance Measurement System