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st: RE: vececm


From   Joly.Patrick@ic.gc.ca
To   statalist@hsphsun2.harvard.edu
Subject   st: RE: vececm
Date   Fri, 27 Sep 2002 10:45:41 -0400

Konstantin Komissarov [mailto:kbpf@mail.com] wrote

>> How can I impose restriction on cointegrating
>> vectors using vececm command?

The help file for -vececm- states that:

restricted(numlist) imposes restrictions on one or more
   of the cointegrating vectors.  (lrjtest with option
   restrict must have been previously conducted.)
   numlist refers to those specific vectors which are
   to be restricted, that is, type restricted(2 4) to
   use restricted vectors 2 and 4 as computed by
   lrjtest.

Example,

   use http://fmwww.bc.edu/ec-p/data/macro/wgmacro.dta, clear
   johans investment income consumption, lags(2)
   lrjtest investment, c(1) restrict
   vececm, cir(1) sm(1) lags(3) restrict(1)

If inference leads you to believe that there are 2 cointegrating
relationships
but you wanted to restrict only the second vector, you could (at your own
peril) do

   johans investment income consumption, lags(2)
   lrjtest investment, c(2) restrict
   vececm, cir(2) sm(1) lags(3) restrict(2)

By 'at your own peril' I mean that -vececm- is meant to be enabling in the
sense that it allows you to select all or some of the restricted vectors
from -lrjtest- (the remaining vectors are those calculated by -johans-).
That said, -lrjtest- only tests the hypothesis that a subset of variables do
not appear in ANY of the cointegrating relations.  Therefore, it is
advisable to select ALL of the restricted vectors if one is to apply any
restrictions at all, i.e. if there are two cointegrating relations, type

   lrjtest investment, c(2) restrict
   vececm, cir(2) sm(1) lags(3) restrict(1 2)


Patrick Joly
joly.patrick@ic.gc.ca
pat.joly@utoronto.ca
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