Two or more non-stationary variables are cointegrated if there is a linear combination of those variables which is stationary.

learn more… | top users | synonyms

0
votes
0answers
18 views

How to estimate Vector Error Correction Model in a linear equation

I am confused about the Vector Error Correction Model (VECM). The main objective of my study was to determine the effects of public expenditure components on economic growth over 35 years. GDP is the ...
0
votes
1answer
20 views

Two-step Engle and Granger's procedure

If I want to check if there is cointegration between $X_t$ and $Y_t$ in the following model, is it enough to check p-value of Breusch-Godfrey test? The maintained hypothesis in this test is no ...
0
votes
0answers
20 views

Specifying integration level of time series

How to specify the level of integration of $X_t$ in such case? I am familiar with testing integration in R, cointegration strategies, but which method to use in such case? In brackets there are ...
0
votes
0answers
13 views

Two - Step Engle and Granger ECM model for multiple variables in R [closed]

I'm looking for a R package which will allow me to estimate the Two - Step Engle and Granger ECM model with numerous variables. I have looked at the apt package ...
2
votes
2answers
33 views

Cointegration Approach

I want to perform a cointegration test between metal prices in USA and India. For USA prices are in dollars per pound and for India they are is in rupees per quintal (100 kilogram). Before checking ...
2
votes
1answer
27 views

Are there levels of cointegration?

I've seen someone describe two timeseries as being highly or not very highly cointegrated much the same as you'd describe two timeseries as being highly or not so highly correlated. I don't believe ...
0
votes
0answers
24 views

Unbalanced regression testing Uncovered Interest Parity

This is my first time using the site - and first time I've asked a question, so please redirect me if I am in the wrong area or if you're aware that a similar question has already been asked. I took ...
0
votes
1answer
23 views

Testing Cointegration at level or with first differences?

I have a question regarding testing for cointegration. The situation is a follows: I have two time series that are both stationary at level when I consider "constant and trend". They are otherwise ...
0
votes
0answers
21 views

ca.jo function in urca, error messsage

I am trying to run a cointegration test with a dummy variable using ca.jo function in urca package. ...
1
vote
1answer
45 views

Granger Causality Test - Non-Stationary

I have two time series that are both non-stationary at level. The ADF test says they have a unit root. When applying the first difference of each time series, they are now stationary. I guess this is ...
0
votes
1answer
53 views

Cointegration in R - Standard error, test statistic and p-value of weights

I'm using urca package in R version 3.2.1. I used ca.jo function on a set of I(1) regular time series variables - taking two at ...
0
votes
0answers
16 views

Determining several Co-integrated Time Series in R

Can you help me with this problem. I have several time series, say 20 time series. I want to determine, among the 20 time series, which are Co-integrated. So it's possible to have 2 time series that ...
0
votes
0answers
25 views

How to treat non stationary independent variables when our dependent is stationary under co-integration?

I am conducting Grangers causality test. I have 14 variables. My dependent (y) and 12 independent variables are found to be stationary at first difference. But the remaining 2 dependent variables are ...
2
votes
1answer
38 views

Is OLS in Engle-Granger a valid method to use when finding the cointegrating vector?

In this post mpiktas showed that the sample correlation measure for two random walks (possible correlated) is a random variable and does not estimate the theoretical correlation. When trying to find a ...
2
votes
0answers
48 views

Autocorrelation in DOLS: will HAC standard errors work?

I am currently estimating a cointegrating regression (DOLS), where my residuals have autocorrelation. Sometimes it is just in one or two lags, but sometimes it is more. My question is: Can I apply HAC ...
0
votes
0answers
15 views

All of the series used in a model must be stationary at the same order of differencing

While practicing VAR analysis, all of the series used in the model must be stationary at the same order of differencing. Is this correct? For example, let $X$~$I(1)$ and $Y$~$I(2)$. Can I use these ...
1
vote
1answer
44 views

Does VECM use the stationary series or the originals ones?

I have some cointegrated series and I decided to build a VECM model. (I differentiated them twice in order to get stationary series and that led me to believe that they might be cointegrated - I ...
1
vote
1answer
1k views

Johansen cointegration test: interpretation of results in EViews

I am not sure whether I am interpreting the cointegration test correctly. This is the test result: Because of the probability of the test I understand that my series are cointegrated of order 2. ...
0
votes
1answer
56 views

Negative cointegration

I am new to the topic of cointegration and my question might be trivial. Let's say $X_t$ is an increasing series and $Y_t$ is a decreasing series; is it possible that they will be cointegrated?
3
votes
1answer
40 views

Is series cointegrated if residual is stationary under time-varying coefficient regression?

Traditionally, if $x_t$ and $y_t$ are both $I(1)$, they are cointegrated when there exists some linear combination $z_t=y_t-$$\gamma$ $x_t$ such that $z_t$ is stationary or $I(0)$. My question is if ...
1
vote
0answers
46 views

How to find AIC, BIC values in Johansen cointegration test in R software? [closed]

In order to take the best lag for Johansen cointegration test (trace) we have to take the lag with minimum AIC and BIC values, right? In R, I have used the syntax ...
0
votes
0answers
42 views

What is the correct procedure for conducting Johansen's Cointegration Test?

As it seems to be said in Walter Enders' Applied Econometric Time Series, I'm doing the following: First, I do believe one should estimate a VAR model on the levels of the data and then proceed to ...
0
votes
1answer
72 views

Estimation of a VECM model

I am attending a time series econometrics course and I am working on VECM models. We have learnt that to estimate a VECM model we should use Engle-Granger two-step procedure but I have not understood ...
0
votes
1answer
24 views

Cointegration between a variable of significant seasonality and one with no significant seasonality

After running programs of deseasonalization, I had an output in which one variable held significant seasonality, for which I corrected, and another that did not have. My main objective was to ...
0
votes
0answers
38 views

Cointegration and variance of time series

If we know that $X_t , Y_t$ are two cointegrated discrete random processes, what can we say about the relationship between variance of the two increments $var(X_{t+h}-X_t)$ , $var(Y_{t+h}-Y_t)$ for a ...
1
vote
0answers
56 views

Cointegration tests: how do you accurately test the necessity of time trends in the Johansen and Engle-Granger tests?

I've been testing some random prices for a study of my own and sometimes this assumption radically changes -- for instance, in Johansen tests -- from no cointegrating vectors, to the whole set of ...
0
votes
1answer
44 views

Replace a variable I (0) by an I (1 ) to test cointegration

I'm building a VAR to model the relationship between production of the economy and some of its determinants. One of the endogenous variables of the model is inflation as a measure of macroeconomic ...
0
votes
0answers
42 views

Johansen test with exogenous variables in cointegrating vector

How is the number of cointegrating vectors determined/tested in the Johansen test if we have the model as follows Δy[t] = Πy[t-1] + Φ1 Δy[t-1] + Φ1 Δy[t-2] + ... +βD[t] ε where in D we have some ...
1
vote
1answer
65 views

Lag length selection for a VAR model

The model I am working on has 4 time series (X, X1, X2, X3). Lag lengths are 5, 1, 4 and 6, respectively. X1, X2 and X3 are stationary at level and X is stationary at second difference. I am applying ...
0
votes
1answer
123 views

Interpretation of VAR and causality

I have two time series(X1 and X2) each having 900 records. I wanted to establish relationship between them and put it in ...
0
votes
1answer
199 views

Interpreting VECM result

X1 , X2 , X3 and X4 are time series which are stationary at level. I want to establish long term relation between them. I am planning to use it as forecasting model for my work. I want to create this ...
0
votes
1answer
156 views

Time series Analysis - VAR or VECM

I have 4 time series. One of them is stationary and rest of them are not. I need to find relation between them. I will use AIC to decide lag length. Should I use VAR or VECM to find relation between ...
0
votes
0answers
21 views

Cointegration of random processes

If we assume that two random processes are cointegrated, do we implicitly make an assumption about the way that the two random processes are generated?
3
votes
1answer
69 views

Johansen cointegration test with structural change in the intercept

I built a VAR in which I discovered that structural change in the intercept so I added a dummy variable as differential intercept. I want to test cointegration by Johansen method and have read that ...
1
vote
1answer
73 views

Econometrics - Relationship between cointegration and ECM

I'm pretty new to econometrics and I've been taking a class at university which uses the book "Econometric theory and methods" by Davidson and MacKinnon. It's a pretty good book but there's one thing ...
0
votes
0answers
37 views

Applying Dynamic OLS

I am trying to analyze the cointegration relationship between I(1) variables using DOLS and want to check whether the following steps are OK: Select optimal lag of leads and lags using information ...
1
vote
0answers
60 views

Doubt on the Johansen Procedure and normalization of the cointegration matrix in R

I'm a beginner at Econometrics, and I'm trying to learn the main econometric techniques in R. My doubt is on how to normalize the cointegration matrix to ensure ...
0
votes
0answers
20 views

Can I take mean of correlation coeficients for equally spaced data sets?

Historic market (Cash) prices and future contract prices are available for last 4 years. I have found correlation between Jan'11 market price with Jan'11,Feb'11 and March'11 future contract prices ...
0
votes
2answers
42 views

Modelling a nonstationary variable with stationary and nonstatianary variables

I am very confused about time series analysis. Let $y$ is the dependent variable, which has an increasing trend. Let $x1$ is a price index for a group of goods. I know that $x1$ creates the general ...
0
votes
0answers
116 views

VECM+GARCH two-stage estimation

Supposed I have a system of cointegrated time series. The conditional mean model is a vector error correction model (VECM). The conditional variance model is a multivariate GARCH (MGARCH) model. For ...
1
vote
0answers
84 views

Vector autoregressive model selection process and relationship with cointegration

Let's say you're looking at two securities that trade closely with one another and you suspect you can somehow trade the spread. How can you use VAR models to estimate the relationship between the ...
0
votes
0answers
43 views

Intercept, deterministic and stochastic cointegration

I have reading on the Johansen co integration model. I am using the jci test function of MATLAB. I have some a little trouble selecting the 'model.' can somebody explain in layman terms which and what ...
2
votes
0answers
94 views

Johansen's cointegration test in small sample under non-normality

I am looking for references regarding the behaviour of Johansen's cointegration test (trace test, perhaps also eigenvalue test) in small samples with non-normal innovations. I wonder how robust the ...
2
votes
2answers
66 views

Forecast encompassing test for cointegrated time series

I am forecasting an integrated time series variable $y_t$. I have two competing forecasts, $f^1_t:=f^1_{t|t-h}$ and $f^2_t:=f^2_{t|t-h}$. I would like to test whether $f^1_t$ forecast-encompasses ...
0
votes
0answers
46 views

cointegration test & error correction model

This is basically a continuous of Augmented Dickey-Fuller Unit Root Test & Cointegration 1) If I want to run a Levin, Lin, Chua cointegration test on the residual. I will have to do these steps: ...
1
vote
2answers
405 views

Augmented Dickey-Fuller Unit Root Test & Cointegration

Using Stata 13. I have a pair of variables (x, y) over time. I want to regress y on x. Do I have to perform a ADF test 1st on x and y to find if both are stationary in their 1st difference (i.e. ...
0
votes
0answers
54 views

Johansen test results using James LeSage toolbox

I am a little new to econometrics. Please pardon me for this silly question. I was running a Johansen cointegration test on two time series using the econometrics toolbox provided by James LeSage for ...
1
vote
0answers
123 views

R: fractionally cointegrated vector autoregressive model with error correction: statistically significant higher returns than cointegration

I can find packages for VECM (vars,urca, tsDyn) but I cannot find: fractionally cointegrated vector autoregressive model with error correction (FVECM). There is a package in MATLAB that deals with ...
0
votes
1answer
98 views

Confusion about cointegration

I have a question regarding the concept of cointegration. Does the concept of cointegration apply to any model? Or it only applies to OLS? For example, I fit the following model $$y_t=x_t \beta+v_t$$ ...
1
vote
0answers
289 views

How to deal with unit roots in panel regression with fixed effects?

I am trying to figure out how to alter my panel regression in a case where fixed effects exists and one (or both) of the variables are I(1) processes (or in other words contain unit root). This is ...