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From | Nick Cox <n.j.cox@durham.ac.uk> |
To | "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu> |
Subject | RE: st: RE: Cointegration analysis including exogenous variables |
Date | Tue, 8 Mar 2011 15:55:47 +0000 |
Sorry, no. I don't even know what I(0) means without looking it up. Nick n.j.cox@durham.ac.uk -----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Beat Hintermann Sent: 08 March 2011 15:53 To: statalist@hsphsun2.harvard.edu Subject: Re: st: RE: Cointegration analysis including exogenous variables i get your point. but i'm working with monthly weather measures, not long-term climate trends. i think it's safe to say that monthly heating-degree days and precipitation events are exogenous to today's fuel and electricity prices. exogenous or not, they are I(0) and therefore not part of the cointegrating relationship. how should I take them into the model? any idea? On 08.03.2011 16:35, Nick Cox wrote: > Treating the weather as "truly exogenous" is not the best current science, although I imagine you don't want to build climate change into your model. > > Nick > n.j.cox@durham.ac.uk > > Beat Hintermann > > I would like to estimate the cointegrating relationship between 3 I(1) > variables, but in the presence of exogenous I(0) variables. > Specifically, I want to estimate the long-term relationship between > electricity, gas and coal prices, but taking into account exogenous > weather shocks (like heating degree days or precipitation, stuff that is > truly exogenous). > > From what I gathered in the Statalist archive, it is not advisable (and > perhaps even impossible) to include exogenous and/or I(0) variables into > the vec model framework. But since the weather definitely influences > electricity and fuel prices, I don't see how ignoring this information > will give me the best result. * * 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/