Notice: On March 31, it was **announced** that Statalist is moving from an email list to a **forum**. The old list will shut down on April 23, and its replacement, **statalist.org** is already up and running.

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

From |
gsanchez@stata.com |

To |
statalist@hsphsun2.harvard.edu |

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

Date |
Thu, 28 Apr 2011 13:09:31 -0500 |

Svein Olav wrote: > I am trying to have no constant in the cointegration vector in the VEC > model. > > â?¦ 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. The â??vec- command provides five different options to restrict the deterministic components included in the VEC model specification. The five alternatives were referred by Eric de Souza in his response to Svein Olav > 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 Those five alternatives imply â??different asymptotic distributions of the statistics used for inference on the number of cointegrating equations and a different asymptotic distribution of the ML estimator of the cointegrating equationsâ?? (see pages 480-1 in the time-series manual [TS]). This is discussed in Johansen (1995, chap. 11). Svein Olav may consider specifying the option â??trend(none)â?? to restrict the constant in the cointegrating equation to zero. However, that option would also restrict to zero the constant in the differenced portion of the model and it would exclude linear trends in the differenced data and linear trends in the cointegrating equations (page 477 in the [TS] provides additional details for the â??trend()â?? option). There is not an option to restrict the constant in the cointegrating equation without imposing any constraints in the other deterministic components of the model. That alternative is not allowed with the â??bconstraints()â?? option because it would modify the asymptotic distributions referred above and, therefore, it would invalidate the estimation and inference on the cointegrating equations. Reference: Johansen, S. 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press. Gustavo Sanchez gsanchez@stata.com * * 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/

**Follow-Ups**:**Re: st: RE: Noconst in cointegration relationship in VECM***From:*Svein Olav Krakstad <sveinolavkrakstad@gmail.com>

**Re: st: RE: Noconst in cointegration relationship in VECM***From:*Charles Koss <hqtiger@gmail.com>

- Prev by Date:
**st: Recall last command in text based interface** - Next by Date:
**st: RE: Recall last command in text based interface** - Previous by thread:
**st: Recall last command in text based interface** - Next by thread:
**Re: st: RE: Noconst in cointegration relationship in VECM** - Index(es):