Re: [Gretl-devel] things to test
On Mon, 14 Mar 2011, Artur Tarassow wrote:
Thanks for your reply and the new cvs, Allin.
You're welcome.
I've got an issue left. Unfortunately, I do not have access to
the Harbo
et al article. I am just a little bit confused by what is meant by
"exogenous"?
In the case one has weakly exogenous I(1) variables, I used to take the
critical values (for all 5 cases) reported in "Pesaran, M.H., Shin Y.,
Smith, R.J. (2000). Structural analysis of vector error correction
models with exogenous I(1) variables. Journal of Econometrics 97:293-343."
Are those critical values provided by Harbo et al. also applicable for
this scenario with weakly exogenous I(1) variables, or are they only
useful for unrestricted I(0) variables (for the cases were one can find
nuisance-free asymptotic critical values)??
In my understanding, yes, they are applicable for weakly exogenous
I(1) variables. However, I'm not totally clear on the apparent
contradiction between Harbo et al and Pesaran, Shin and Smith.
That is, it seems at first sight that PSS gaily produce tables of
critical values for cases that Harbo et al showed to be infested
with nuisance parameters. I need to read the PSS article more
carefully; I think the resolution (if it really is a resolution)
is that PSS mean something different by their definition of the 5
"cases" from what Johansen meant.
I can say this much for sure: Harbo et al are thinking of a setup
(their "partial system") where the extra variables are added (a)
in levels form, restricted to the cointegration space, and also
(b) in first-differences, unrestricted. As Sven has noted, this
corresponds to the Johansen-standard treatment of deterministic
terms (where, for example, the presence of a restricted trend
implies the presence of an unrestricted constant).
Allin