reading the cointegrating vector equation on VAR output

[lebo83]

Dear all,

Please help me. I'm busy doing a study on the effect of exchange rate on the trade balance and need to see the short run and long run effects (J curve).I'm using thh Johansen techniques. All my variables are I(1) and the lag length based on AIC is 2 while SC gives 1. i've opted to use the SC results as i've read somewhere that it is more usable when dealing with quartely data with observations les sthan 120 (i ahve 90 obsevations 1990 -2009). There trace test shows that there are two cointegrating equation while the max eigen shows one. I've seen in other papers that they will provide a table showing there long run cointegrating vector (equation is.......) and i'm unable to write down the equation from the long list of numbers produced by my report (see VAR results below). Please help me on that one as to which columns and rows do i read and report on.

Secondly, im not sure how do i incorporate the residual in the VEC model. do i make residual from the VAR or form the normal OLS equation? Again, how do i report my VEC model results (the equation to write). Latly i want to know if i do the impulse resonse finctions on the VAR or on the VEC model. my guts feeling are that i should do on the VEC model but i'm not sure on that one.
I'm willing to mail my working file for assistance.
Thank you.



Date: 04/19/10 Time: 12:27
Sample (adjusted): 1990Q3 2009Q4
Included observations: 78 after adjustments
Trend assumption: Linear deterministic trend (restricted)
Series: LMANUF LRER LYD LYF
Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test (Trace)


Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**


None * 0.417246 87.11095 63.87610 0.0002
At most 1 * 0.241769 44.99178 42.91525 0.0305
At most 2 0.208783 23.40391 25.87211 0.0984
At most 3 0.063745 5.137631 12.51798 0.5767


Trace test indicates 2 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)


Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**


None * 0.417246 42.11917 32.11832 0.0022
At most 1 0.241769 21.58787 25.82321 0.1644
At most 2 0.208783 18.26628 19.38704 0.0722
At most 3 0.063745 5.137631 12.51798 0.5767


Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegrating Coefficients (normalized by b'*S11*b=I):


LMANUF LRER LYD LYF @TREND(90Q2)
-4.975428 6.847649 5.002965 -77.00729 0.517762
-12.46771 2.890036 -38.32978 57.01881 0.004938
-1.096648 -6.352790 -30.20897 8.188142 0.240632
-2.844169 -2.139972 -6.885436 -32.34655 0.277005



Unrestricted Adjustment Coefficients (alpha):


D(LMANUF) 0.005193 0.040019 -0.019424 0.009301
D(LRER) -0.028108 0.005499 0.014170 2.22E-05
D(LYD) 0.002417 0.001422 0.003937 -0.001008
D(LYF) 0.000908 -0.000351 0.000612 0.000780



1 Cointegrating Equation(s): Log likelihood 782.1795


Normalized cointegrating coefficients (standard error in parentheses)
LMANUF LRER LYD LYF @TREND(90Q2)
1.000000 -1.376293 -1.005535 15.47752 -0.104064
(0.27597) (0.99063) (2.80265) (0.01611)

Adjustment coefficients (standard error in parentheses)
D(LMANUF) -0.025836
(0.05812)
D(LRER) 0.139848
(0.02744)
D(LYD) -0.012023
(0.00606)
D(LYF) -0.004520
(0.00211)



2 Cointegrating Equation(s): Log likelihood 792.9734


Normalized cointegrating coefficients (standard error in parentheses)
LMANUF LRER LYD LYF @TREND(90Q2)
1.000000 0.000000 3.900646 -8.634352 0.020601
(0.54388) (1.92011) (0.01201)
0.000000 1.000000 3.564778 -17.51943 0.090580
(0.74115) (2.61653) (0.01636)

Adjustment coefficients (standard error in parentheses)
D(LMANUF) -0.524780 0.151214
(0.14347) (0.07944)
D(LRER) 0.071287 -0.176579
(0.07352) (0.04071)
D(LYD) -0.029758 0.020659
(0.01618) (0.00896)
D(LYF) -0.000142 0.005206
(0.00568) (0.00314)



3 Cointegrating Equation(s): Log likelihood 802.1065


Normalized cointegrating coefficients (standard error in parentheses)
LMANUF LRER LYD LYF @TREND(90Q2)
1.000000 0.000000 0.000000 -142.3088 1.016417
(30.4960) (0.21118)
0.000000 1.000000 0.000000 -139.6837 1.000651
(28.6189) (0.19818)
0.000000 0.000000 1.000000 34.26981 -0.255295
(7.58460) (0.05252)

Adjustment coefficients (standard error in parentheses)
D(LMANUF) -0.503479 0.274610 -0.921158
(0.14061) (0.10208) (0.51217)
D(LRER) 0.055748 -0.266596 -0.779452
(0.07026) (0.05100) (0.25591)
D(LYD) -0.034075 -0.004352 -0.161361
(0.01499) (0.01088) (0.05460)
D(LYF) -0.000813 0.001320 -0.000473
(0.00561) (0.00407) (0.02044)





Vector Autoregression Estimates
Date: 04/19/10 Time: 11:53
Sample (adjusted): 1990Q3 2009Q4
Included observations: 78 after adjustments
Standard errors in ( ) & t-statistics in [ ]


LMANUF LRER LYD LYF


LMANUF(-1) 0.339135 -0.016897 -0.025766 -0.001908
(0.12089) (0.06531) (0.01354) (0.00506)
[ 2.80533] [-0.25871] [-1.90302] [-0.37693]

LMANUF(-2) 0.138152 -0.029129 0.012192 0.006493
(0.12462) (0.06733) (0.01396) (0.00522)
[ 1.10859] [-0.43265] [ 0.87357] [ 1.24414]

LRER(-1) -0.140766 0.922312 -0.012852 -0.014692
(0.22460) (0.12134) (0.02515) (0.00941)
[-0.62674] [ 7.60096] [-0.51091] [-1.56193]

LRER(-2) 0.392609 -0.148634 0.003665 0.011323
(0.21468) (0.11598) (0.02404) (0.00899)
[ 1.82884] [-1.28155] [ 0.15243] [ 1.25945]

LYD(-1) -0.240019 -0.463482 0.857074 0.058957
(1.12670) (0.60870) (0.12619) (0.04719)
[-0.21303] [-0.76142] [ 6.79209] [ 1.24948]

LYD(-2) -0.731773 -0.505017 0.021256 -0.050657
(1.07706) (0.58189) (0.12063) (0.04511)
[-0.67942] [-0.86789] [ 0.17621] [-1.12305]

LYF(-1) -0.083249 -1.261860 0.532745 1.555507
(2.45108) (1.32420) (0.27451) (0.10265)
[-0.03396] [-0.95292] [ 1.94069] [ 15.1535]

LYF(-2) 1.596417 2.571491 -0.350312 -0.569590
(2.67503) (1.44520) (0.29960) (0.11203)
[ 0.59678] [ 1.77934] [-1.16928] [-5.08431]

C 1.786595 1.670260 0.129586 -0.005768
(0.94415) (0.51008) (0.10574) (0.03954)
[ 1.89228] [ 3.27451] [ 1.22550] [-0.14587]


R-squared 0.870408 0.930806 0.997178 0.999434
Adj. R-squared 0.855383 0.922784 0.996851 0.999368
Sum sq. resids 0.605461 0.176718 0.007594 0.001062
S.E. equation 0.093674 0.050608 0.010491 0.003923
F-statistic 57.93011 116.0251 3047.969 15230.17
Log likelihood 78.80330 126.8292 249.5674 326.2940
Akaike AIC -1.789828 -3.021260 -6.168395 -8.135744
Schwarz SC -1.517900 -2.749332 -5.896467 -7.863816
Mean dependent 3.848584 1.741388 7.166453 4.471647
S.D. dependent 0.246325 0.182122 0.186958 0.156097


Determinant resid covariance (dof adj.) 3.21E-14