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st: RE: VAR or VEC model
Kind,
I'm not an expert but let me tell you what I know:
Both are multivariate model of time series and the main difference
regards to the final part of you question. You need to run first a
causality test as well as a unit root test in order to explore if there
is a endogenous or exogenous relation among your variables.
Let's say you have var1 and var1, if var1 causes "Grangerly" to var2 and
both don't have jointly a unit root you might run a VAR. If var1 doesn't
cause "Grangerly" var2 but they jointly have a unit root the correct
model is the error correction.
Nevertheless, any explanation by mail would be incomplete. You might
review the Ender's book "Applied Econometrics of Time Series". Good
Luck.
-----Original Message-----
From: [email protected]
[mailto:[email protected]] On Behalf Of Ihtesham
Afzal
Sent: Lunes, 24 de Agosto de 2009 03:51 p.m.
To: [email protected]
Subject: st: VAR or VEC model
Hello.
I would like to test the relationship between the FTSE100 index and a
variety of macroeconomic variables.
What is the difference between the VAR and VEC models in estimating the
relationships and so how do I decide which one to use in my estimation.
I am looking to do the Cointegration and Granger Causality Tests if that
makes a difference.
Kind Regards.
Ihtesham.
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