1) I think you will find that vecm 1 1 Z2 Z1 --rc
estimates your system very well. I dont see the problem. 2) Consider simulating the model in VECM format. Otherwise I see no problem with your approach. 3) If the series are not cointegrated then the residuals from the cointegrating regression may have a stochastic trend -- thus the specification of the test. Hayashi has a very good account of the Engle Granger cointegration test. 4) To estimate a vecm one must have determined in advance fro testing and/or economics the number of cointegrating relationships (or a least a range for that number). I would not attach any priority to programming the maximum number. In the version on my PC if I try to enter to large a number of cointegating vectors I get a message telling me that I have done so and I must correct it before I can proceed. Best Regards John On 7 March 2012 14:56, Talha Yalta <talhayalta(a)gmail.com> wrote: > Hi all, > > I have a few questions/issues to report with a cointegration example > that I am trying to simulate using: > > nulldata 500 > setobs 1 1950 --time-series > series u1 = randgen(N,0,1) > series u2 = randgen(N,0,1) > series Z1 = 0 > series Z1 = Z1(-1) + u1 > series Z2 = 75 + 0.75*Z1 + u2 > > 1)- When I run a VECM model afterwards, I always have one of the > inverse roots on the edge. Am I doing something wrong? > 2)- Is there a better way of creating cointegrated series where I can > also set the EC coefficients (and/or the lag order)? > 3)- Running the EG test, I notice that if the original series are > tested with a constant and/or a trend, the residuals in the 4th step > are also tested with a constant and/or trend. Can this be a bug, since > we are testing residuals? > 4)- In the VECM specification window, one can choose up to 10 > cointegrating vectors even if there are 2 series. IMHO, it would be > nice to put a limit depending on the number of series. > > Thanks very much in advance for any help or suggestions. > > Cheers > Talha > > > -- > “An expert is a person who has made all the mistakes that can be made > in a very narrow field.” - Niels Bohr (1885-1962) > -- > > _______________________________________________ > Gretl-users mailing list > Gretl-users(a)lists.wfu.edu > http://lists.wfu.edu/mailman/listinfo/gretl-users -- John C Frain Economics Department Trinity College Dublin Dublin 2 Ireland www.tcd.ie/Economics/staff/frainj/home.html mailto:frainj(a)tcd.ie mailto:frainj(a)gmail.com
