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From |
Nick Cox <n.j.cox@durham.ac.uk> |

To |
"'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: Noconst in cointegration relationship in VECM |

Date |
Thu, 28 Apr 2011 14:49:51 +0100 |

I don't know how to do what you want, but I don't see that it makes much sense anyway. If I am misunderstanding, naturally feel free to correct me, but this is my analysis. I am regarding -vec- as just a fancy regression, but that could be very wrong. The names of your variables indicate that they are all natural logs of something else. If you want to force a relationship through the origin, that implies, as I understand it, forcing it through lnprice = lnrent = lnAM = 0 which in turn implies that there is some white magic about the point with three coordinates Price = 1 (in whatever units price is measured) Rent = 1 (ditto) AM = 1 (ditto) -- which seems an almighty strong assumption, and privileges the units of measuring you are using, which normally is just a matter of convention. Otherwise put, there can be some definite rationale about forcing through an origin (0, 0) which is, in original coordinates, a limiting case which should be approached, e.g. tiny animals can be expected to converge on some point like Weight = 0, length = 0 But why should this be true on logarithmic scales? Nick n.j.cox@durham.ac.uk Svein Olav Krakstad I am trying to have no constant in the cointegration vector in the VEC model. I know how to have constraints on the variables, but the constant does not work in the same way. For example if I restrict (i.e.) the variable lnrent: constraint define 1 [_ce1]lnrent=1 vec lnprice lnrent lnAM, rank(1) lags(2) trend(constant) bconstraints(1) It works fine. Then I am thinking that it should only be to restrict the constant in the same way: constraint define 1 [_ce1]_cons=0 vec lnprice lnrent lnAM, rank(1) lags(2) trend(constant) bconstraints(1) But this do not work. Could you please help me to figure this out? * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: Noconst in cointegration relationship in VECM***From:*Svein Olav Krakstad <sveinolavkrakstad@gmail.com>

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