1. Identification example

2. This continues on from the Johansen demonstration
Under standard finance theory the weekly libor rate should cointegrate with the monthly and the weekly should cointegrate with the 3 month
Implies 2 bivariate vectors

3. Weekly = monthly
Weekly = 3month
So 6 restrictions (-1,1,0) and -1,0,1)
We need 4 for identification so 2 over identifying restrictions to test.

4. This follows on from the last demo
We have already tested cointegration
Estimated the model subject to 2 cointegrating vectors
Now we impose the restrictions

8. First we will apply just identifying restrictions

14. Now we will apply and test the 2 over identifying restrictions

17. Restricted cointegrating vectors

18. TEST of restriction