# Long-term targets of variables in levels for differenced VAR

I am currently trying to estimate a VAR(1) model for some variables including inflation. Lets say the VAR model looks like this: $$X_t = c + \Pi X_{t-1} + \epsilon_t.$$ In this case we can set long-term targets for our variables by transforming the constant term $$c$$. For instance, if we have inflation in our $$X_t$$, and we want it to move to the long-term ECB target of 2%, then we can set the constant term in $$c$$ corresponding to inflation equal to 2.

Now, in my data inflation is not stationary so I estimate my VAR on the differenced series. I was wondering if it is possible to set the long-term target of inflation in levels equal to 2% in such a model, since $$c$$ now corresponds to the long-term difference.

• Yes, I'm sorry for responding this late! I was away for two days – Pim Sep 23 '18 at 9:20
• No problem at all :) – Richard Hardy Sep 23 '18 at 10:28