Re: [Gretl-devel] VECM experts ahoy!
On Tue, 5 Apr 2011, Sven Schreiber wrote:
Am 03.04.2011 00:38, schrieb Allin Cottrell:
> Now, as I understand it, PSS have a "Case II" which is identical
> to Johansen's restricted constant. Fine. But they also have a
> "Case III" which in some way resembles Johansen's unrestricted
> constant case except that it does _not_ generate a trend in Y.
> This I'm not getting. Can anyone help? I don't understand how you
> can "unrestrict" the constant and yet not have it leak out of the
> cointegration space into a trend in Y.
Maybe it's just a misunderstanding: when they say "Case III:
(Unrestricted intercepts; no trends.)" I interpret it as "the trend term
in the equation for the VECM disappears", not as "the trend in the
process is absent". So it's just the standard cases IMO.
I think I now understand this better: the test statistic is indeed
just the standard one, but PSS refer it to a different
distribution from Johansen. I've written up a note on this, by way
of response to a 2009 piece in the Journal of Applied Econometrics
by Paul Turner, which I think gets it wrong. My note is at
http://www.wfu.edu/~cottrell/tmp/coint_model.pdf
Comments, criticisms welcome.
Allin