Here is a question related to IRF, impulse response functions, in the vars package.
My data has following attributes: I do have two log-transformed variables that are tested as I(1). I.e. the two variables are stationary after first differencing and not stationary at level, allowing for "constant and trend". The I(1) variables are found to be cointegrated.
- What do I have to consider when drawing an impulse response function
- Can I use my variables at level (which are not stationary) or do I have to use the first-differenced data?
- In case: When do I have to use a VECM?