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Re: st: cointegration, johans command


From   Salima Bouayad Agha <Salima.Bouayad-Agha@univ-lemans.fr>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: cointegration, johans command
Date   Sun, 01 Aug 2010 09:57:39 +0200

Stéphanie,
i totally agree with that comment.
Working on VEC with other more dedicated software, you can add some exogenous variables but usually they recomanded that they could be dummy variables or specific intervention variables. Remember that a vec model is not a simultaneous equation econometric models, even if they look very similar they are not used for the same purpose.

SalimaChristopher Baum <kit.baum@bc.edu> a écrit :

<>
Stephanie,

You should be very careful in working with a VECM which contains arbitrary exogenous variables. Quoting from [TS] p. 481:

Johansen (1995, chap. 11) shows that inference about the
number of cointegrating equations is based on nonstandard distributions and that the addition of any term that generalizes the deterministic specification in (1) changes the asymptotic distributions of the statistics used for inference on the number of cointegrating equations and the asymptotic distribution of the ML estimator of the cointegrating equations. In fact, Johansen (1995, 84) notes that including event indicators causes the statistics used for inference on the number of cointegrating equations to have asymptotic distributions that must be computed case by case. For this reason, event indicators
may not be specified in the present version of vec.


I would rely on Stata's vec if I were you. The vec apparatus contains commands to test for appropriate lag length, dynamic stability, etc., which I do not believe are available in the older user-written software.

Kit

On Jul 28, 2010, at 9:54 AM, Stéphanie Combes wrote:

I was recommended that command so I kind of thought it had some abilities the command vec didn't have but I'm relatively new at stata so I may have been mistaken. As a matter of fact, with johans and vececm I can add exogeneous variables to my model, something I don't manage to do with vec..

2010/7/28 Christopher Baum <kit.baum@bc.edu>
On Jul 28, 2010, at 2:33 AM, Stephanie wrote:

> I'm trying to use the command johans for cointegration but I fail to
> understand how to get the estimated cointegrated relations (it is apparently > not given as a non optional output, but I can't find which option would supply
> them). I tried to get them next through the vececm command but I couldn't
> either.
> If someone uses regularly the command, I would be very grateful for your
> help. Would you give any piece of advice for the choice of lags?
>
> Bonus question : if cointegration rank is above 2, do I have to check that
> both elasticities to long-run equations are negative in my estimated models?
> I must confess that I have a hard time interpretating when there is more
> than one cointegrated equation.

Out of curiosity, why would you want to use this user-written command, dating from 2003 and depending on software written for Stata version 5, when official Stata has had the ability to do Johansen-Juselius tests for cointegration
for several versions now?

Kit



Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html


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Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html


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