( EViews10): Estimate and Interpret VECM (2), var, vecm, causality, lags, Johansen, innovations

So, what do you understand by vector error correction model (VECM) You may say any of the following: that it is a system having a vector of two or more variables that all the variables in a VECM are endogenous there are no exogenous variables VECM is constructed only if the variables are cointegrated cointegration implies evidence of a longrun relationship among the variables it is a restricted VAR model with cointegrating restrictions built into the specification constructed to examine long and shortrun dynamics of the cointegrated series restricts the longrun behaviour of endogenous variables to converge to their cointegrating relationships that the cointegrating term is known as the error correction term it is a representation of cointegrated VAR (courtesy of grangers representation theorem) and that the resulting VAR from VECM representation has more efficient coefficient estimates. Also, note that VAR specified in differences is a misspecification while VECM is obtained by differencing a VAR, henc