A note on the equivalence of long-run and short-run identifying restrictions in cointegrated systems

In this paper it is shown that, given a bivariate cointegrated system, if the variable which is first in the causal ordering is not caused in the long-run by the second variable, then Blanchard, Quah (1989) and Sims (1980) orthogonalization are equivalent. Since no restriction on the dynamic shape of the variable ordered first is required, we generalized Cochrane's 1994 result (Cochrane, 1994). (C) 1997 Elsevier Science B.V.