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st: RE: Noconst in cointegration relationship in VECM


From   DE SOUZA Eric <eric.de_souza@coleurope.eu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Noconst in cointegration relationship in VECM
Date   Thu, 28 Apr 2011 16:05:22 +0200

It is not clear to me which case you want:
 trend(constant) include an unrestricted constant in model; the default
 trend(rconstant) include a restricted constant in model
 trend(trend) include a linear trend in the cointegrating equations and a quadratic trend in the undifferenced data
 trend(rtrend) include a restricted trend in model
 trend(none) do not include a trend or a constant
See page 477 of the time series manual for a detailed explanation


Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu


-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Svein Olav Krakstad
Sent: 28 April 2011 15:27
To: statalist@hsphsun2.harvard.edu
Subject: st: Noconst in cointegration relationship in VECM

Hi,

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?
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