EViews.com

Dear all,

Please assist me in determining the VAR lag length.

I tried with 4, follow by 3, 2 and 1. The result I get is 0 (Based on AIC)

If this is the case, is there any alternatives to proceed/ what should I do on my dataset?

My dataset tested with ADF--> All stationary at 1st difference but non-stationary at level (at 5%)

Please help me. :(

Thanks.





VAR Lag Order Selection Criteria
Endogenous variables: DLNGDP DLNRCPT DLNREER DLNTRADE
Exogenous variables: C
Date: 08/28/10 Time: 15:01
Sample: 1980 2009
Included observations: 25

Lag LogL LR FPE AIC SC HQ

0 121.7899 NA* 9.50e-10* -9.423191* -9.228171* -9.369101*
1 130.0448 13.20778 1.80e-09 -8.803580 -7.828480 -8.533129
2 144.3289 18.28372 2.32e-09 -8.666313 -6.911132 -8.179500
3 155.4940 10.71849 4.68e-09 -8.279521 -5.744259 -7.576347
4 174.1810 11.95968 7.93e-09 -8.494480 -5.179138 -7.574945

* indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

Maybe forget about the lag length selection criteria (which are inherently problematic anyway), and choose the order of the VAR based on what you believe to be an appropriate length - i.e. justify it using theory rather than the statistical methods.

That seems quite commonplace