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Hi,

Can anyone tell me how to estimate the Engle and Kozicki (1993) common features testing step-by-step?

Thanks

Best way is to follow the method in Vahid and Engle (1992 I think). This can be done quite easily in eviews. Try the following:
1. Find the optimal lag length of the system (using level VARs)
2. Construct a matrix to be used to check for common cycles. It is used to find canonical correlation coefficients (or eigenvalues) it looks like:
mat1 = @inverse(matyy)*matyx*@inverse(matxx)*matxy
where y is the vector of log changes at t and x includes the lagged changes and the cointegrating relationship.
3. Tricky part -- find the eigen values of this matrix. It is non-symm so you have to use another program (eviews can only do symm)
4. Bring the eigenvalues back into eviews and set up the test statistics that use these eigenvalues
5. Now you should know the # of common trends and cycles and you can estimate the whole system using 3sls or some other estimation method.

Good luck!

Thank you for the tips! Is there any way i can contact you for further clarifications?

sure -- leroache@gmail.com