# What does the Argument "type" in VAR() - function do?

Right now I am working with vector autoregressive models in order to make 3 months forecasts for a commodity good (sawlogs) y. I have several time-series of "follow-up-products" of sawlogs that should work as "predictors" for saw-log prices from a logical point of view. I encountered within the VAR-function from package "vars" (http://cran.r-project.org/web/packages/vars/vars.pdf), that one attribute called "type" has the following expressions: "const", "both", "trend", "none". I really don't know what this means from a statistical point of view.

Since neither the package-description nor other literature I've screened so far can give me an answer I actually understand I'd like to ask you guys the following:

How should I interpret/understand and use the argument "type" in R's VAR() Function?

What do those 4 different arguments really mean? "both", "none", "trend", "constant"? Could anyone explain this in a simple way and probably provide an example as well?

Does this mean that I can directly use non-stationary time series for my VAR-model since I can consider trend/season afterwards by setting the "type-argument" to both, or am I wrong here?

constant means there is an intercept included in each equation in the model. trend means there is a linear time trend included. both means both of them are included. none means neither of them is included.
Type ?VAR in R to get an explanation. There you will find the algebraic form of the model provided. Pay attention to the CD_t term. You may also see the vignette for the vars package, perhaps it could help.
• If the non-stationarity is caused by a deterministic time trend (for example, a linear time trend), it can be treated by including a time trend regressor in the VAR model (option type="trend"). If, on the other hand, non-stationarity is due to the process being integrated (e.g. I(1) process), this cannot be cured in such a simple way. By the way, both is not about seasonal component. There is another option for that – it has a name season. Commented Nov 19, 2014 at 15:38