Introduction to VAR models
Posted: Tue Mar 22, 2016 3:19 am
Good morning,
I'm a student of the degree in Economics and I'm just conducting a research about the effects of uncertainty on Consumption. For that, my purpose is to use a Structural Var, which seems (regarding the literature I have read) to be the best option. Nevertheless, I have never studied VARs at the university so even I have read a lot about it on the internet I have several doubts which I would like to ask here and I would be really grateful if someone can help me to start working with my var:
1. I did the UNIT ROOT TEST for my both variables (EPU and Consumption) and I got that EPU is stationary but C is not so I used C in 1s differences and then I got DC stationary. Is this ok? I mean, must I work in this case with EPU and with DC(C in first differences) to continue with my VAR?
2. When doing the coointegration test I get, DC and EPU are cointegrated, what involves this for proceeding with my VAR?
2. Even though I only want to test the effect of EPU on C, should I use more variables when conducting my VAR? In that case, which ones for example?
Thank you so much
I'm a student of the degree in Economics and I'm just conducting a research about the effects of uncertainty on Consumption. For that, my purpose is to use a Structural Var, which seems (regarding the literature I have read) to be the best option. Nevertheless, I have never studied VARs at the university so even I have read a lot about it on the internet I have several doubts which I would like to ask here and I would be really grateful if someone can help me to start working with my var:
1. I did the UNIT ROOT TEST for my both variables (EPU and Consumption) and I got that EPU is stationary but C is not so I used C in 1s differences and then I got DC stationary. Is this ok? I mean, must I work in this case with EPU and with DC(C in first differences) to continue with my VAR?
2. When doing the coointegration test I get, DC and EPU are cointegrated, what involves this for proceeding with my VAR?
2. Even though I only want to test the effect of EPU on C, should I use more variables when conducting my VAR? In that case, which ones for example?
Thank you so much