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Error correction model
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<p>An error correction model (ECM) belongs to a category of multiple <a href="/facts/Time_series/fSXPR817">time series</a> models most commonly used for data where the underlying variables have a long-run common stochastic trend, also known as <a href="/facts/Cointegration/na815pCW">cointegration</a>. ECMs are a theoretically-driven approach useful for estimating both short-term and long-term effects of one time series on another. The term error-correction relates to the fact that last-period's deviation from a long-run equilibrium, the <i>error</i>, influences its short-run dynamics. Thus ECMs directly estimate the speed at which a dependent variable returns to equilibrium after a change in other variables. </p>