Re: [Gretl-devel] coint2 with exogenous variables
On Fri, 11 Nov 2011, Andreas Noack Jensen wrote:
I have some new comments on this thread. First of all I
would like hear about the status on the question on
restricting the deterministic terms in cointegration
testing. To state my view a bit differently: If there exist
any defense for testing in the unrestricted models I would
really like to know about it because I am only aware of
recommendations to avoid those models.
The "unrestricted constant" case, at least, seems unavoidable
if one has trending data but does not want to admit a trend
into the cointregating vectors, which seems a plausible case
for many applications.
Next thing is about the restricted exogenous variables
option. I think I have found a new bug. If you run the
script you will see the problem. The short run parameters
are problematic.
OK, it's not really a new bug -- it's just that the adjustment
of the treatment of the restricted exogenous terms (i.e. don't
lag them in the state 1 regressions) was not yet carried over
into stage 2 (estimation of the full VECM). That's now fixed
in CVS.
Finally I have a comment regarding our discussion of the
convention for restricted terms. I thinks the convention in
Gretl right now is one of the better solutions. One could
also think of a convention where the first differences of
the restricted variables were added automatically and the
level was lagged one period as it used to be. This would be
more in line with CATS. But I think that these two solutions
are the most sensible. However, the old convention i Gretl
might come from the PcGive documention
http://www.doornik.com/pcgive/ section 15.7.1. The funny
thing is that I think that the documentation is wrong and
that PcGive/PcFiml is doing the same thing as Gretl which
the script should also show. It is a bit of a mess to keep
track of.
True! Anyway, thanks for checking into this. I can't now
remember the source for our prior treatment of restricted
exogenous terms.
Allin Cottrell