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I'm performing an econometric analysis and all my variables (in daily frequency) are stationary, so I've decided to use a VAR model. After analyzing the data in Stata, it suggests all variables should have a lag of 1 day except one (let's call it Z), which should have a lag of 4 days.

When constructing the model, should I:

  1. Lag every variable up to 4 lags?
  2. Lag every variable once and variable Z until lag 4?

Thanks

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1 Answer 1

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There is no requirement for the different variables in a VAR model to have the same number of lags. I am not sure how you decided that 1 and 4 lags were optimal, but if that was a sound procedure then go with it (option 2).

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