VECM
Posted: Tue Aug 16, 2016 7:36 am
Hi all,
If I have my dependent variable that is I(1) along with 3 independent variables, and 1 independent variable is I(0), is it possible to drop the I(0) term and test for cointegration? If yes and cointegration is present, is there a way of including the previous I(0) term that was dropped previously into the VECM?
Or should the model just be done in VAR form with all variables stationary?
Many thanks.
If I have my dependent variable that is I(1) along with 3 independent variables, and 1 independent variable is I(0), is it possible to drop the I(0) term and test for cointegration? If yes and cointegration is present, is there a way of including the previous I(0) term that was dropped previously into the VECM?
Or should the model just be done in VAR form with all variables stationary?
Many thanks.