Error Correction Step

Problem

Apply one error-correction adjustment: change = short_run_change - adjustment_speed * spread_prev.

A positive previous spread pulls the change downward toward the long-run equilibrium.

Hint

adjustment_speed is often called alpha in the ECM literature.

case 1

in: [2,0.5,0.1]

expected: 0.3

case 2

in: [0,1,0.3]

expected: 1

case 3

in: [-1,0,0.5]

expected: 0.5

case 4

in: [5,2,0]

expected: 2

Starter codePython

def error_correction_step(spread_prev, short_run_change, adjustment_speed):
    # Your code here
    pass

4 test cases · run your code against them in the editor