Estimation of VAR - I(0) and I(1) processes
Posted: Tue Feb 14, 2012 8:21 am
Hi All,
I am completing an econometrics topic, estimating a VAR. I am looking for some advice/confirmation on my method.
I have an information set combining of four I(1) process and one I(0). I am estimating a VAR model, and when first testing for cointegration (Johansen LR Test) I enter all I(1) process but exclude the I(0), as clearly cointegration cannot occur.
No cointegration is found so I wish to proceed with a VAR estimation. Now, I am unsure, but clearly all my I(1) processes need to be integrated before entering the system? But can the I(0) process go straight in aswell? (or) Do I include the I(0) as an exogenous variable?
Any feedback would be greatly appreciated.
Many Thanks, : )
I am completing an econometrics topic, estimating a VAR. I am looking for some advice/confirmation on my method.
I have an information set combining of four I(1) process and one I(0). I am estimating a VAR model, and when first testing for cointegration (Johansen LR Test) I enter all I(1) process but exclude the I(0), as clearly cointegration cannot occur.
No cointegration is found so I wish to proceed with a VAR estimation. Now, I am unsure, but clearly all my I(1) processes need to be integrated before entering the system? But can the I(0) process go straight in aswell? (or) Do I include the I(0) as an exogenous variable?
Any feedback would be greatly appreciated.
Many Thanks, : )