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[mousumi]

Sir,
I wanted to know why we need to reduce the lag by 1 (as estimated in VAR model) when we do Johansen cointegration ?What is the logic behind it?I have a data set of GDP and FDI where the lag length selection is same in level form and first differnce form (which is 4).Which lag length should I choose to perform Johansen cointegration test 4 or 3?

Mousumi Mandal
DATED:-15.09.2009