If null hypothesis is true meaning that variables are not cointegrated. So you can not run ECM/VECM model. You can only run unrestricted VAR, which talk about short run causality running from independent to dependent variable.
My 3 variables are I(1) and want to check the impact of each of the 2 explanatory variables on the dependent variable. To run a VECM do I need a cointegrating relationship between the 3 variables together or between the 1st independent variable and the dependent variable and the 2nd independent variable and the dependent variable separately?
Dear collegues I am currently stuck on testing PPP for long run effect between France and Germany during post-Bretton Woods period (April 1973-December 1990). I need to check for cointegration (Johansen test) among Fr/Ger exchange rate, Fr CPI and Ger CPI. Taking logarithms, basically, the equation looks like ln(Ger/Fr)=ln(Ger CPI)-ln(Fr CPI). Preliminary, we should test for unit root, and there is the most interesting thing: utilizing ADF(with constant and trend) and Perron's Procedure I got Ger/Fr = I(1), CPIs are both I(2). The question is how can I perform cointegration test if ranks of integration are different? Is it eligible to take the difference concerning CPIs to derive I(1) process and proceed with Johansen test? Regards
@Sayed Hossain you have said that, before the cointegration, we should be check that the data's are in "LEVEL". I want to ask, i have five variables (one depend. and four independet). two of them are indexes and the rest are original no. series. in this case, my prof. suggest to use a "natural log" of each variables to do cointegration. what do you say?
What I do normally.....at the very beginning I choose lag for the VAR system model...you can see one of my videos : lag selection for VAR ....I use this lag for Johansen as well as VAR model. Whether there is 1 or 3 cointegrating equations, variables will be cointegrated. So you can use VECM model now.
Thanks for your comprehensive lectures on Johansen Cointegration Test. May I ask you the following questions. (1). If my variables have more than one cointegrating equations, can I still use such variables to run VECM? (2). If yes, how do I analyse such equations assuming it is about three cointegrating equations for example? (3). if no, what methodology do I apply?
no, the models here means 5 sets of assumptions model 1: no intercept of terns in CE or test VAR model 2: intercept (no trend) in CE - no intercept in VAR model 3: intercept (no trend) in CE and test VAR, model 4: intercept and trend in CE - no trends in VAR model 5: intercept and trend in CE - linear tend in VAR. Thanks for your concerns, I get through it already, thanks
In the Johanson cointegration test I was wondering how do I check if each one of the normalized variables are statistically significant? E-views provides the st errors from which I can get the t statistics when divided with the coefficient but from there I don’t know how to test for significance. In the event that there is more than one cointegrating relationship I assume I have to check the significance of the more than the first normalized cointegrating equation.
I want to ask if the lag interval must be chosen by 1. I try to use different choice of lag interval. The Johansen Cointegration Test. test failed by lag interval 1 but passed when I take thelag interval of 4.
wait, guyz, so are we sopposed to run the johansen test before we run the VAR?....or wait, is it the VAR that tells us whether to run a VAR or VECM? i really am confused, i dont get this, plz someone answer me!!!
What happens when trace test indicates one cointegrating equation but the max-eigenvalue test indicates no cointegration? How can I decide what model should I run?
sir if the in johenson co integration test , if the null hypothesis is true which means that the variables do not exhibit long run association , then can i proceed with vecm
For example model 1 of JH (no intercept or trend in CE or test VAR), model 2(intercept (no trend)in CE- no intercept in VAR), model 3(intercept (no trend) in CE and test VAR),....we have 5 model in Johansen Cointegration test.
There are two test...One is Trace and the second one Max-eigene....Suppose if you choose Max-eigene is your base/benchmark, then proceed according to Max-eigene result...But if you choose Trace as benchmark, then follow it. Best is when both telling the same result.
by the way, i have another question. 1)if we already use OLS regression method, do we still need to make this test to check for LR relationship? 2) which data that we need to use. the first difference data (stationary) or the original data(nonstationary) to make this test?
Dear Sir Sayed, I currently run the VECM model. The Johansen test of My model says have three cointegrated equation at all 3 option, exclude the 1st and 5th option. So which technique should I choose to consider which model is better? Can I use a few test of OLS on my model? Thanks Sir.
Hello Sir, i have a question. I have done my unit root test and some variables are stationary at level and some are stationary at 1st difference. Which test should do afterwards??? that is which cointegration test should i use since i plan to test my model with an ARDL approach. Can you help me please im stuck and need submit my work soon. Thank you very much . gdbless Awaiting a reply frm you soon.
First make the variables stationary (after doing first or second difference) and then run the regression model. Unit root testing can tell you when a variable becomes stationary.
Dear Sir, If there are more than 2 Models in Johansen significance, which one should we choose and base on what criteria ? Or we choose all Models? Thanks Sir.
Hello Mr. Hossain, I would like to ask how to treat growth rates in Unit Root Testing and Cointegtration Testing. I'm evaluating a regression eq'n wherein all variables are growth rates. Should I treat is as level data or first difference data? Thank you. Kind regards, Econ. Student
Good evening Sir. What if I have more than 10 variables that I want to test for long run relation ship? How many CE do I have to get to say that they in fact are co-intergaded ? Thank you.
Dear Faycal, Thank you. I would like to invite you to join Hossain Academy Facebook at below link and post your question there. If I know the answer I shall respond. Thank you once again, Sayed Hossain from Hossain Academy. facebook.com/groups/hossainacademy/
thanks Mrs Sayed i suppose if you uploaded some vedios for new users to this program and explain every command why when and for what it used. also the data which kind of data and how modify the data , such as how we can do first difference. for the beginers thanks
Sir my data is not all stationary at level, some are stationary at 1st difereence and some are on level...nowwhat i can do.how i run cointegration test? I take 6 variables for 34 years to check long relationship between inflation and trade openness in case of Pakistan.
Thank you. I would like to invite you to join Hossain Academy Facebook Group at below link and join our group discussion. Thank you. Sayed Hossain from Hossain Academy. facebook.com/groups/hossainacademy/
hello sir, i don't understand when u are saying according to the t-stat all 3 variable are cointegreted and also according to the max elgen stat 3variable are cointegrted how? u are look at what to take this conclusion?
Salma Binti MALWIRA Please join Hossain Academy Facebook below and post your question. Indeed I am there to share with you. Thank you Sayed Hossain from Hossain Academy facebook.com/groups/hossainacademy/
dear sir, i want to ask if my result show cointegrated in the regression model( has no intercept & no trend) , do i still need to run others regression model? (and actually i tried to run the model 3 and 4 already, i get the same result too)
I guess you have chosen option 3? I think it is fine. You can now go for VECM/ECM model as variables are cointegrated. Thank you Sayed Hossain from Hossain Academy
thank you for your help Sir...yea..i alr done the VECM and impulse response test..but i'm not good on interpretation..can i know is it enough for i write what you mentioned in this tutorial? means that i only interpret the Option 3 is enough for my test? my dependent variable is hpi(housing price index), and my independent variables is Population, gdp and cpi..
Do u have facebook? If you have join my Hossain Academy group and post question there. I shall reply. The link is below: facebook.com/groups/hossainacademy/
If null hypothesis is true meaning that variables are not cointegrated. So you can not run ECM/VECM model. You can only run unrestricted VAR, which talk about short run causality running from independent to dependent variable.
My 3 variables are I(1) and want to check the impact of each of the 2 explanatory variables on the dependent variable. To run a VECM do I need a cointegrating relationship between the 3 variables together or between the 1st independent variable and the dependent variable and the 2nd independent variable and the dependent variable separately?
Dear collegues
I am currently stuck on testing PPP for long run effect between France and Germany during post-Bretton Woods period (April 1973-December 1990). I need to check for cointegration (Johansen test) among Fr/Ger exchange rate, Fr CPI and Ger CPI. Taking logarithms, basically, the equation looks like ln(Ger/Fr)=ln(Ger CPI)-ln(Fr CPI). Preliminary, we should test for unit root, and there is the most interesting thing: utilizing ADF(with constant and trend) and Perron's Procedure I got Ger/Fr = I(1), CPIs are both I(2). The question is how can I perform cointegration test if ranks of integration are different? Is it eligible to take the difference concerning CPIs to derive I(1) process and proceed with Johansen test?
Regards
@Sayed Hossain you have said that, before the cointegration, we should be check that the data's are in "LEVEL". I want to ask, i have five variables (one depend. and four independet). two of them are indexes and the rest are original no. series. in this case, my prof. suggest to use a "natural log" of each variables to do cointegration. what do you say?
What I do normally.....at the very beginning I choose lag for the VAR system model...you can see one of my videos : lag selection for VAR ....I use this lag for Johansen as well as VAR model. Whether there is 1 or 3 cointegrating equations, variables will be cointegrated. So you can use VECM model now.
Sayed Hossain sir, do you have video on forecasting with cointegration approach using scenarios: baseline, short run and long run
Thanks for your comprehensive lectures on Johansen Cointegration Test. May I ask you the following questions. (1). If my variables have more than one cointegrating equations, can I still use such variables to run VECM? (2). If yes, how do I analyse such equations assuming it is about three cointegrating equations for example? (3). if no, what methodology do I apply?
no, the models here means 5 sets of assumptions
model 1: no intercept of terns in CE or test VAR
model 2: intercept (no trend) in CE - no intercept in VAR
model 3: intercept (no trend) in CE and test VAR,
model 4: intercept and trend in CE - no trends in VAR
model 5: intercept and trend in CE - linear tend in VAR.
Thanks for your concerns, I get through it already, thanks
In the Johanson cointegration test I was wondering how do I check if each one of the normalized variables are statistically significant? E-views provides the st errors from which I can get the t statistics when divided with the coefficient but from there I don’t know how to test for significance. In the event that there is more than one cointegrating relationship I assume I have to check the significance of the more than the first normalized cointegrating equation.
what is the conclusion if trace test indicates 2 cointegrating equation at 0.05 level and how can we determine which factor are cointegrated?
I want to ask if the lag interval must be chosen by 1. I try to use different choice of lag interval.
The Johansen Cointegration Test. test failed by lag interval 1 but passed when I take thelag interval of 4.
Hi I want to know if the Johansen cointegration test is done on the label variables or we have to make them stationary by taking 1st difference?
wait, guyz, so are we sopposed to run the johansen test before we run the VAR?....or wait, is it the VAR that tells us whether to run a VAR or VECM?
i really am confused, i dont get this, plz someone answer me!!!
What happens when trace test indicates one cointegrating equation but the max-eigenvalue test indicates no cointegration? How can I decide what model should I run?
sir if the in johenson co integration test , if the null hypothesis is true which means that the variables do not exhibit long run association , then can i proceed with vecm
Dear Sayed, what if trace test indicate 3 cointegration and Egien value indicate only 1 cointegration?
For example model 1 of JH (no intercept or trend in CE or test VAR), model 2(intercept (no trend)in CE- no intercept in VAR), model 3(intercept (no trend) in CE and test VAR),....we have 5 model in Johansen Cointegration test.
hi sir. can the cointegration test be used in the model that only have one dependent variable and one independent variable? eg: GDP = a + aFDI + e ?
Yes.... Thank you.....do you mean to say that they have to be integrated of the same order?
There are two test...One is Trace and the second one Max-eigene....Suppose if you choose Max-eigene is your base/benchmark, then proceed according to Max-eigene result...But if you choose Trace as benchmark, then follow it. Best is when both telling the same result.
Now if three variables are found cointegarted using Johgansen Test, you can run VECM model. If not, you should run only VAR.
by the way, i have another question.
1)if we already use OLS regression method, do we still need to make this test to check for LR relationship?
2) which data that we need to use. the first difference data (stationary) or the original data(nonstationary) to make this test?
Dear Sir Sayed,
I currently run the VECM model. The Johansen test of My model says have three cointegrated equation at all 3 option, exclude the 1st and 5th option. So which technique should I choose to consider which model is better? Can I use a few test of OLS on my model? Thanks Sir.
Hello Sir, i have a question. I have done my unit root test and some variables are stationary at level and some are stationary at 1st difference. Which test should do afterwards??? that is which cointegration test should i use since i plan to test my model with an ARDL approach. Can you help me please im stuck and need submit my work soon. Thank you very much . gdbless Awaiting a reply frm you soon.
Just a note on copyright: TH-cam is in public domain. Anyone can download anything from here. So no need for that copyright message.
First make the variables stationary (after doing first or second difference) and then run the regression model. Unit root testing can tell you when a variable becomes stationary.
Moreover, for the max lag length in Johansen test, how to choose an appropriate number?
I have a video entited 'lag selection, cointegration and VECM' If you see it you will see a guideline of lag selection..
Dear Sir,
If there are more than 2 Models in Johansen significance, which one should we choose and base on what criteria ? Or we choose all Models?
Thanks Sir.
Hello Mr. Hossain,
I would like to ask how to treat growth rates in Unit Root Testing and Cointegtration Testing. I'm evaluating a regression eq'n wherein all variables are growth rates. Should I treat is as level data or first difference data? Thank you.
Kind regards,
Econ. Student
Do it at level or non-stationary level...but make sure those variables are stationary after first differenced...
Please help me! What happen when I can´t reject "None" and also "At most 1".
Why do you rewrite variables when choosing cointegration test? They are already typed in...
what does mean model here?
Thanks Professor.
For this case normally I choose option three which is relevant to most of the data
What is written there?
Meaning that variables are not cointegrated. So u can not run VECM but can run VAR
Good evening Sir. What if I have more than 10 variables that I want to test for long run relation ship? How many CE do I have to get to say that they in fact are co-intergaded ?
Thank you.
Dear Faycal, Thank you. I would like to invite you to join Hossain Academy Facebook at below link and post your question there. If I know the answer I shall respond. Thank you once again, Sayed Hossain from Hossain Academy. facebook.com/groups/hossainacademy/
thanks Mrs Sayed
i suppose if you uploaded some vedios for new users to this program and explain every command why when and for what it used. also the data which kind of data and how modify the data , such as how we can do first difference. for the beginers
thanks
Sir my data is not all stationary at level, some are stationary at 1st difereence and some are on level...nowwhat i can do.how i run cointegration test? I take 6 variables for 34 years to check long relationship between inflation and trade openness in case of Pakistan.
There is no way to check as there is no p value
You can choose any one by choosing one as bench mark.
u can not say 2 models in Johansen significans, did u mean 2 significant cointegr relationships?
Dear Sir, for n variables, how many number of cointegrations we need? is it n-1?
Sir can you tell me what's the deal with lag?? Why we take lag length?
Thank you. I would like to invite you to join Hossain Academy Facebook Group at below link and join our group discussion. Thank you. Sayed Hossain from Hossain Academy. facebook.com/groups/hossainacademy/
Yes in future
Normally I choose option 3 stated above
Yes....integrated of same order
hello sir, i don't understand when u are saying according to the t-stat all 3 variable are cointegreted and also according to the max elgen stat 3variable are cointegrted how? u are look at what to take this conclusion?
Salma Binti MALWIRA Please join Hossain Academy Facebook below and post your question. Indeed I am there to share with you. Thank you Sayed Hossain from Hossain Academy facebook.com/groups/hossainacademy/
There are two cointegration equations meaning that all the variables cointegrated
dear sir, i want to ask if my result show cointegrated in the regression model( has no intercept & no trend) , do i still need to run others regression model? (and actually i tried to run the model 3 and 4 already, i get the same result too)
I guess you have chosen option 3? I think it is fine. You can now go for VECM/ECM model as variables are cointegrated. Thank you Sayed Hossain from Hossain Academy
thank you for your help Sir...yea..i alr done the VECM and impulse response test..but i'm not good on interpretation..can i know is it enough for i write what you mentioned in this tutorial? means that i only interpret the Option 3 is enough for my test? my dependent variable is hpi(housing price index), and my independent variables is Population, gdp and cpi..
Do u have facebook? If you have join my Hossain Academy group and post question there. I shall reply. The link is below:
facebook.com/groups/hossainacademy/
Do u have facebook?
But you can see this video has explained everything taken from Hossain Academy EVIEWS section.
th-cam.com/video/MSLNkgyygP0/w-d-xo.html
You need to put all variables together for Johansen Test
Yes it can
Thank you sir. :)
Plz i need a help , about making an equation of johansen test
Plz i need to contact with you as soon as you can
I can not understand your question
see chapter 5 in Walter Enders 3ed.p 304. regards
Check my videos