Weak exogeneity and long-run and contemporaneous identifying restrictions in VEC models

This paper shows that under the King et al. (1991) approach [KPSW, 1991. St ochastic trends and economic fluctuations. American Economic Review 81, 819 -840] to structural identification in VEC models, the structural shocks wit h transitory effects do not have a contemporaneous impact on the weakly exo genous variables. This result is used to establish the conditions under whi ch the KPSW and Sims (1980) identification schemes [Macroeconomics and Real ity. Econometrica 48, 1-48] are equivalent in a model of US consumption, in vestment and private output. (C) 1999 Elsevier Science S.A. All rights rese rved.