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st: VECM: Deterministic Factors & Significance for ce1 in short-run parameters


From   "Daniel Ilg" <daniel.ilg@ku.de>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: VECM: Deterministic Factors & Significance for ce1 in short-run parameters
Date   Wed, 6 Feb 2013 14:34:33 +0100

Dear users,

I have 1 problem and 1 question.
I apply the VECM for a time series. My dependent variable is default
probability and all variables are I(1).

My problem:
I want to determine the deterministic components for my VECM.
My independent variables have different deterministic components, so I can't
derive my deterministic factors from theory. Another problem is, that I'm
just interested in a cointegration relation of 1 (default probability is the
variable I want to explain). So I'm not interested in more ranks than 1. I
applied pentula and modified pentula principle but the problem is, I get
more ranks and - as said before - I'm just interested in 1 cointegration
relation. So, how can I determine the deterministic components of my VECM
for rank = 1?

My question:
When I get my VEC output does my "ce1" need to be significant in my Error
Correction "d_default_probability"? What does it mean when "ce1" is not
significant in the short-run?

Thx a lot & regards,
Daniel


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