Re: [Gretl-users] Cointegration with Gretl -Suggestions!
On Thu, February 9, 2006 11:36, john w wrote:
As I know ( and maybe I'm wrong) these are the steps when
determing the
cointegration rank with PcGive.
1. Specify variables - in this step you can choose const and trend to be
unrestricted or not.
2. Estimate VAR model
3. Test estimated VAR model. If model is miss-specified you can add more
lags etc., etc.
4. Run Johansen cointegration test to determine rank.
5. Re-estimating VAR in VECM.
In my opinion, this is not very different from what I proposed in my earlier
message
(http://ricardo.ecn.wfu.edu/pipermail/gretl-users/2006-February/000481.html)
As we discussed yesterday, the main problem in determing
cointegration rank
( for example in gretl) is to determin the wright number of lags to be used.
Now, I'm not talking about VECM, I'm talking about testing cointegration
rank which is one step before VECM.
As you know, when determing cointegration rank with gretl you are asked
about lags. Number of lags are closely related to cointegration rank, and
cointegartion rank is very sensitive to entered lags.
Now, tell me on which basis do you enter lags in gretl when testing for
Johansen cointegration ?
The issue looks very simple to me: choose a lag length that YOU consider
suitable on the basis of the VAR estimates and your a-priori opinions (hell,
I'm speaking like a Bayesian here! God forbid!) and then use that lag length
in the Johansen test.
Is it AIC or BIC criteria ? If so, who can guarantee you that your
model is
not miss-specified.
Nobody. Or, better still, any empirical model is misspecified anyway. A model
is a toy world. All you can ask is that your toy is a cool one.
Do you look at the individual equatations results in gretl
cointegration
test output ?
The true is that PcGive gives some more output then other software. There is
no magic.
My point is that gretl becomes better.
Otherways, I will not write so much.
We all appreciate that. But IMO, gretl already does what you need. The fact
that some choices that YOU have to make are not automatically made on your
behalf is a virtue to me, not a defect.
--
Riccardo "Jack" Lucchetti
Dipartimento di Economia
Facoltà di Economia "G. Fuà"
Ancona