I am modeling liquidity variable, real money growth with real asset price returns. The former is I(1) and the latter is I(0). The objective is to see the predictive power and forecast. However, can we apply VAR if both the variables have a different order of integration?
Will using I(0) against differenced I(1) series be a correct approach? especially keeping in mind I need to check forecast power through rolling window and then forecast further?