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st: RE: VECM: Stata drops variable


From   DE SOUZA Eric <eric.de_souza@coleurope.eu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: VECM: Stata drops variable
Date   Mon, 11 Jul 2011 10:17:41 +0200

For exactly the same reason that I explained in our last exchange. "dropped" means the coefficient is set to zero. See our previous exchange


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 Barbara Engels
Sent: 11 July 2011 10:04
To: statalist@hsphsun2.harvard.edu
Subject: st: VECM: Stata drops variable

Dear Statalist,

estimating a VECM with Stata 10, Stata automatically drops coefficients of variables in the cointegrating equation: 
(lags 2, rank 2)

Cointegrating equations

Equation           Parms    chi2     P>chi2
-------------------------------------------
_ce1                  3   57.60437   0.0000
_ce2                  3   135.9643   0.0000
-------------------------------------------

Identification:  beta is exactly identified
                 Johansen normalization restrictions imposed
------------------------------------------------------------------------------
        beta |      Coef.   Std. Err.      z    P>|z|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
_ce1         |
      tfp_in |          1          .        .       .            .           .
       lnbrd |  (dropped)
       lnfrd |  -.5602317   .1775941    -3.15   0.002    -.9083096   -.2121538
  lllneduexp |   .0401034   .4113914     0.10   0.922     -.766209    .8464157
       lnftl |   -.066383   .0194038    -3.42   0.001    -.1044138   -.0283522
       _cons |   7.937646          .        .       .            .           .
-------------+----------------------------------------------------------------
_ce2         |
      tfp_in |  (dropped)
       lnbrd |          1          .        .       .            .           .
       lnfrd |  -.8801873   .6528244    -1.35   0.178      -2.1597     .399325
  lllneduexp |  -5.511943   1.512249    -3.64   0.000    -8.475896   -2.547991
       lnftl |  -.3724166   .0713271    -5.22   0.000    -.5122152   -.2326179
       _cons |   51.38039          .        .       .            .           .
------------------------------------------------------------------------------

I wonder why. And I also need especially these variables to form part of the cointegrating matrix beta. 
Any help is highly appreciated.
Best,
Barbara
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