Seasonal dummies using VAR

[henriqueld]

Good afternoon, everyone.

I'm estimating the pass-through of the exchange rate to the inflation with VAR and, in order to get rid of all seasonality, I wanted to use seasonal dummies for each quarter of the year (I have a sampe that goes from 2000 to 2014, quarterly). Anyway, can anyone tell me how to insert those kind of dummies to my VAR model?

Thanks!

[EViews Gareth]

Do you want them as exogenous or endogenous variables?

[henriqueld]

Endogenous.

What I just did was create 3 series, each of them with a "1" according to what quarter it represents. Then typed the three of them into the Exogenous box. Would that be right if I wanted them Exogenously? Or is there a right way to do that?

[EViews Gareth]

You can use @expand(@quarter) to generate seasonal dummies in EViews. I doubt you want them to be endogenous though. You can enter them in the exogenous box, but be sure to drop the constant.

[henriqueld]

You can use @expand(@quarter) to generate seasonal dummies in EViews. I doubt you want them to be endogenous though. You can enter them in the exogenous box, but be sure to drop the constant.

I'd only want to drop the constant if I added 4 dummy variables, right? I mean, 1 for each quarter of the year.
Or even if I only use 3 dummies, I'd still want to drop the constant?

Thanks!

[EViews Gareth]

If you use @expand(@quarter) it will put the four dummies in, so yeah, that's why you'd want to drop the constant.

[henriqueld]

OK, perfect! Thanks, Gareth! :D