VECM

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snsburnttoast
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Joined: Mon Aug 15, 2016 9:13 am

VECM

Postby snsburnttoast » Tue Aug 16, 2016 7:36 am

Hi all,

If I have my dependent variable that is I(1) along with 3 independent variables, and 1 independent variable is I(0), is it possible to drop the I(0) term and test for cointegration? If yes and cointegration is present, is there a way of including the previous I(0) term that was dropped previously into the VECM?

Or should the model just be done in VAR form with all variables stationary?

Many thanks.
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