I am trying to estimate a VECM and I read in Asteriou´s book "Applied Econometrics" that
"The most common procedure in choosing the optimal lag length is to estímate a VAR model including all our variables in levels (non-differenced data). This VAR model should be estimated for a large number of lags, then reducing down by reestimating the model for one lag less until we reach zero lags."
However, I will introduce a dummy variable in my model.
Question: should I include the dummy in this VAR or should I include the dummy only afterwards when I estimate the VECM?