Error correction model

ID: error-correction-model

An Error Correction Model (ECM) is a type of econometric model used to represent the short-term dynamics of a time series while ensuring that long-term equilibrium relationships between variables are maintained. It is particularly useful in the context of cointegrated time series data, where two or more non-stationary time series move together over time, implying a long-run equilibrium relationship between them.

New to topics? Read the docs here!