say I have two time series that move together but both seem to be characterised by a deterministic trend.
I have two questions:
- How can I test whether the trend is deterministic or stochastic?
- How would I determine the long-run relationship between the two series in the event they both have deterministic trend? I know that in case of two stochastic trend you might want to use VECM (in case they are co-integrated), but I am not sure if VECM also applies to deterministic trends?
Many thanks, and please ask if you need further information.