Thanks, Sven for your helpful suggestion
Best,
César
---------- Original Message ----------
From: Sven Schreiber <svetosch@gmx.net>
To: gretl-users@gretlml.univpm.it
Subject: [Gretl-users] Re: Full Information Maximum Likelihood (VECM)
Date: Thu, 11 Jul 2019 16:09:50 +0200
Am 11.07.2019 um 14:49 schrieb macrocs@juno.com:
> To whom may it concern
> Do you know the instructions for a Full Information Maximum Likelihood?
> I'd like to run a VECM including short-run restrictions (common cycle
> restrictions) (Vahid and Engle (1993)). Thanks.
Hi Cesar,
I think the best way would be something that PcFiml/PcGive/Oxmetrics
used to do in the old days: estimate the cointegration relations first
and add the estimated level ECTs to a system of differences. In this
second system you can then impose arbitrary restrictions.
(In a 'vecm' in gretl you can only restrict beta and alpha AFAIK.)
See also ch. 31 of the guide (multivariate models).
So roughly:
lagorder = 4
vecm lagorder 1 x y
series ec = $ec # need a loop for rank > 1
diff x y
list dxlags = lags(lagorder-1, d_x)
list dylags = lags(lagorder-1, d_y)
vahidengle <- system
equation d_x const ec(-1) dxlags dylags
equation d_y const ec(-1) dxlags dylags
end system
restrict vahidengle
... # concrete coeff restrictions
end restrict
estimate vahidengle method=fiml
However, I don't remember the type of the restrictions needed in this
case. If they also involve the levels/EC terms, it could be that some
auxiliary identities must also be defined, "explaining" to gretl the
relationship between the EC term and the (lagged) differences. (Using
'identity' lines in the system block as mentioned in the guide.)
hth,
sven
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