I am somewhat confused. The trace test and the max eigenvalue test often lead to different inferences about the number of cointegrating vectors. The trace test may be more appropriate to the sequential testing methodology used in the Johansen methodology. I would also think about the economics of the problem. You will have to identify the cointegrating vectors if you wish to make progress. May I dare to say that the economics of the problem are just as important as the statistical methodology.

On 26/10/06, Javier García <javigarcia83@yahoo.es> wrote:

Then how is it that the nule hypothesis r = 0 and r = 1 are both accepted to the two contrasts? the only consistent hypothesis with the results is that both nule hypothesis is that the rank (pi) minor or equal to "r", because the rank can't be 0 and 1 at the same time.

thank you

Javi

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John C Frain
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