All variables are i1, so i have to look into cointegration relations. Eviews data series analysis functions are superior to many of its competitors. After i put all varibles i0 forms into the eviews system and run the johansen cointegration test, i found that there is one cointegration relation according to maxeigen stat and 3 cointegration relationships according to trace stat. The tests di er in terms of the alternative hypothesis 3if 1 0 and 1 2 n, then 1 0 2 n 4. Testing for cointegration using the johansen methodology. The test statistic for testing for 2 versus 1 common trends is more negative 35. Dear statalist users, i am investigating the environmental kuznets hypothesis in a balanced panel framework with t21 1991 2011 and n21 and all variables in log.
The summaries show that the first test rejects a cointegration rank of 0 no cointegration and just barely rejects a cointegration rank of 1, but fails to reject a cointegration rank of 2. Accordingly, this paper is divided into five sections. Section two, examines the concept of stationarity, section three. The johansen test is a test for cointegration that allows for more than one cointegrating relationship, unlike the englegranger method, but this test is subject to asymptotic properties, i. Cross validated is a question and answer site for people interested in statistics, machine learning, data analysis, data mining, and data visualization. Testing for cointegration errorcorrection representation some examples the permanent income hypothesis pih implies cointegration between consumption and income. Pedroni englegranger based, kao englegranger based, fisher combined johansen. The tests also produce maximum likelihood estimates of the parameters in a vector errorcorrection vec model of the cointegrated series. Under the assumption that the series are not cointegrated, all linear combinations of, including the residuals from sols, are unit root nonstationary. Please include your serial number with all email correspondence. Eviews accelerates econometric estimation, forecasting and time series analysis so.
To run a cointegration test with one lag in the level series, type 0 0 in the edit field. A free alternative to eviews statistical consultants ltd. Therefore, for each panel test of cointegration sampsi command tests whether the value of the sample statistics is equal to the value of the statistics associated to the dgp, given the level of significance of the test. These exercises provide a good first step toward understanding cointegrated processes. I got the following result and so i know now that at least 5 out of 9 of my time series are cointegrated. Then test the residuals for nonstationarity using the augmented dickeyfuller test. The error correction model as a test for cointegration. If the d diffeth rence has p autoregressive and q moving average terms, the differenced series is said to be armap,q and. A note on power comparison of panel tests of cointegration. Mac and linux users need to install a version of windows. Test for cointegration using the johansen test matlab.
Cointegration analysis of oil prices and consumer price. Or, these cointegration techniques may not be appropriate when the sample. I tested for cointegration between three variables in eviews. This video shows you how to perform the johansen cointegration test using eviews10. Regress one i1 variable on another using least squares. The dropdown menu at the top of the dialog box allow you to choose between three types of tests. This view carries out the johansen, englegranger, or phillipsouliaris test for whether the series in the group are cointegrated or not. A time series that requires d differences to get it stationary is said to be integrated of order d. After performing the two variants of johansen cointegration test it suggests that there is one cointegrating vector. After performing stationarity test, there are three 3 likely outcomes. I then perform a test for cointegration using the engle and granger 1987 method. Growth theory models imply cointegration between income, consumption, and investment.
If there is cointegration among variables, x t is cointegrated with the cointegration vectors b. Westerlund panel cointegration test xtwest 16 apr 2016, 06. Stata module for testing for cointegration in heterogeneous panels, statistical software components s456941, boston college department of economics, revised 29 jun 2010. On the cointegration tab, specify the number of ci vectors 1 here and the ci model constant, trend,etc in the ce cointegration equation and the var. Here the terminology longrun equilibrium relationship is some. Eviews 8 student version is inexpensive and ideal for instructional use in. Greene 2008, page 685 uses an ardl model on data from a number of quarterly us mac roeconomic. Can anyone help in explaining the estimation output for. How to perform the johansen cointegration test for two. Cointegration analysis of oil prices and consumer price index in south africa using stata software sukati, mphumuzi ministry of agriculture september 20 online at mpra paper no.
Therefore, the test rejects the null hypothesis, which. Westerlund panel cointegration test xtwest statalist. The englegranger and phillipsouliaris residualbased tests for cointegration are simply unit root tests applied to the residuals obtained from sols estimation of equation 27. Vecms including structural vars, unitroot and cointegration tests, kalman filter, etc. The relationship between trade, fdi and economic growth in. It will help you to run johansen cointegration in eviews. New guest blog post on the beveridgenelson filter in eviews. That is, the rate of convergence is t 2 rather than just t in chebyshevs inequality. The first thing you should do always is to sketch the englegranger test, explaining the null and the alternative hypotheses. We then estimate equation 3 by ols and perform an ftest. Arma, garch, vars and vecms, unitroot and cointegration tests, etc. Johansen test for cointegration building a stationary portfolio in this blog post, you will understand the essence of the johansen test for cointegration and learn how to implement it in python. Therefore, a test of the null hypothesis of no cointegration. This module should be installed from within stata by typing ssc install xtwest.
Gretl is very similar to the econometrics software eviews. For example, when y t and z t are cointegrated ols is super consistent. If the series are cointegrated, the dickeyfuller test statistic will be statistically significant. If the sample size is too small then the results will not be reliable and one should use auto regressive distributed lags ardl. Another popular test for cointegration is the augm.
In addition, the critical values for the adf and pp test statistics must account for the fact that the residuals used in the tests depend upon. Is a crossplatform software package for econometric analysis, written in the c. Estimate the parameters of the long run relationship. In this post, i use simulated data to show the asymptotic properties of an ordinary leastsquares ols estimator under cointegration and spurious regression. To perform the cointegration test from a var object, you will first need to estimate a var with your variables as described in estimating a var in eviews. Gretl for ms windows can be found here, and gretl for mac os x here. Money demand models imply cointegration between money, nominal income, prices, and interest rates.
Mac and linux users need to install a version of windows xp, vista, 7 all work to be able to run the application. Next, open an eviews group containing the series of interest, and select views cointegration test panel cointegration test to display the cointegration dialog. The stationary linear combination is called the cointegrating equation and may be interpreted as a longrun equilibrium relationship among the. Impose restrictions on coefficients if you have priors more on this later.
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