Re: st: RE: Cointegration analysis including exogenous variables

[Syed Basher <syed.basher@yahoo.com>]

Dear Beat,

I still didn't find a convincing answer to Eric's question. I recently estimated 
a VECM model in Eviews where I used a binary dummy variable as an exogenous 
regressor, without really knowing how that affect the rank statistics.

Syed



----- Original Message ----
From: Beat Hintermann <b.hintermann@unibas.ch>
To: statalist@hsphsun2.harvard.edu
Sent: Wed, March 9, 2011 12:00:26 PM
Subject: Re: st: RE: Cointegration analysis including exogenous variables

Dear Syed

thank you very much for your offer to estimate it in Eviews. I might 
take you up on it, but only if I don't manage to estimate it myself. I 
have access to Eviews in our finance lab, I've just never used it. But 
now that I know that Eviews allows for exogenous variables, I might give 
it a shot. If I can't get it done I might give you another shout.

Thanks again,

Beat


On 08.03.2011 17:24, Syed Basher wrote:
> This may not be relevant for Stata users, but the problem you described is 
easy
> to handle in other packages. For example, Eviews has an option to include
> exogenous variables in cointegrating model. If you do not mind sharing your
> data, I can attempt to estimate it for you in Eviews.
>
>  Syed Basher
> Doha, Qatar.
>
>
>
>
> ----- Original Message ----
> From: Beat Hintermann<b.hintermann@unibas.ch>
> To: statalist@hsphsun2.harvard.edu
> Sent: Tue, March 8, 2011 6:53:13 PM
> Subject: Re: st: RE: Cointegration analysis including exogenous variables
>
> i get your point. but i'm working with monthly weather measures, not
> long-term climate trends. i think it's safe to say that monthly
> heating-degree days and precipitation events are exogenous to today's
> fuel and electricity prices.
>
> exogenous or not, they are I(0) and therefore not part of the
> cointegrating relationship. how should I take them into the model? any
> idea?
>
>
>
> On 08.03.2011 16:35, Nick Cox wrote:
>> Treating the weather as "truly exogenous" is not the best current science,
>> although I imagine you don't want to build climate change into your model.
>>
>> Nick
>> n.j.cox@durham.ac.uk
>>
>> Beat Hintermann
>>
>> I would like to estimate the cointegrating relationship between 3 I(1)
>> variables, but in the presence of exogenous I(0) variables.
>> Specifically, I want to estimate the long-term relationship between
>> electricity, gas and coal prices, but taking into account exogenous
>> weather shocks (like heating degree days or precipitation, stuff that is
>> truly exogenous).
>>
>>    From what I gathered in the Statalist archive, it is not advisable (and
>> perhaps even impossible) to include exogenous and/or I(0) variables into
>> the vec model framework. But since the weather definitely influences
>> electricity and fuel prices, I don't see how ignoring this information
>> will give me the best result.
>>
>>
>> *
>> *  For searches and help try:
>> *  http://www.stata.com/help.cgi?search
>> *  http://www.stata.com/support/statalist/faq
>> *  http://www.ats.ucla.edu/stat/stata/
>

-- 
Beat Hintermann
Assistant Professor
University of Basel, Faculty of Business and Economics (WWZ)
Peter Merian-Weg 6, 4002 Basel, Switzerland
Tel. +41 61 267 3339
------------------------------------------

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