Like the title says, I've got two time series, one is stationary to begin with and thus has no unit root, the other time serie is stationary after one-time differencing.
I want to create a model out of this and I know that when unit roots are present, I should test for cointegration. But I've read in Engle & Granger (1987) that cointegration tests are only to be done when you have two or more I(1) variables, is that correct?
So I cannot find in literature if I should now use a VAR model on differences or test for cointegration and perhaps do a Vector Error Correction model.
Can anyone help me? I would be very thankful!