Lags of dependent variable: correct use and interpretation
Posted: Sun Feb 28, 2016 11:33 am
Dear fellow eviews users,
I am currently doing some econometrics with, probably, nonstationary variables in a panel setting. I was hoping for cointegration, but, ADF-test on stationarity of residuals of a cointegrating regression performs rather bad. A regression using first differences performs even worse.
Nevertheless, I found out that including two lags of my dependent variable yields very fine results (good R² and great results from autocorrelation tests). Can I trust these results? That is, are they unbiased and consistent? If so, can these lags be reasonably interpreted?
Many thanks!
I am currently doing some econometrics with, probably, nonstationary variables in a panel setting. I was hoping for cointegration, but, ADF-test on stationarity of residuals of a cointegrating regression performs rather bad. A regression using first differences performs even worse.
Nevertheless, I found out that including two lags of my dependent variable yields very fine results (good R² and great results from autocorrelation tests). Can I trust these results? That is, are they unbiased and consistent? If so, can these lags be reasonably interpreted?
Many thanks!