VECM model and rank

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Chthoniid
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Joined: Mon Oct 22, 2012 6:02 pm

VECM model and rank

Postby Chthoniid » Sun Sep 21, 2014 4:45 pm

I'm afraid VECM regressions are pushing me into unfamiliar territory.

I have 4 equations. The Johansen test identified 4 cointegrating equations. I have two exogenous variables as well.
I'm trying to get my head around what the 'rank' should be and I don't get it.

Could I get a little bit of help here? It makes a a crucial difference if the model has rank 3 to if it has rank 1.

As far as I can understand, 4 co-integrating equations will generate rank 3

TIA

B

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