Exogenous variable in cointegrating space in VECM

[rhollies]

Hello i wonder if you could help me.

I am working wiht a colleague (he is using Cats in rats) where he specifies a VECM with employment being exogenous because the other variables do not explain employment. So we have in the long run occupied office space is determined by rents and employment and then rents are dermined by vacancy.

But I either have a situtation in the VECM where employment is including as endogenous and gets into the long-run occupied stock equation BUT then there is a long run for employment being determined by rents and occupied stock.

I see I can make Employment exogenous whihc solves the employment being determined by rents and occupied stock but does nothing to include employment in the long-run occupied stock equation.

Is there a solution you can think of?

Thanks. :)