variables are I(0) no cointegration tests are required and OLS can be used.

cointegrating relationship would be maximum N-1. For example, if number of variables

in the VAR model are 5, cointegrating relationship can be maximum 4, can not be 5.

Tahir Abubakar commented> Just put 1 in the no. of cointegrating equation box for

easy interpretation.

Sayed Hossain commented> I guess you have got 3 cointegration equation as per

Johansen test and that is why you have put 3 there. But I would prefer to put 1 there

instead of 3 so that I can extract Johansen long run equation.

Moulana Naykrasyvishyy Cholovik commented> This means ‘’number of cointegrating

equations’’ or simply, numbers of long-run equations. This option allows you to

choose how many co-integrating equations you wish to estimate at the same time

within 1 window. If you have 4 variables, for example, then you can choose maximum

3 cointegrating equations and you’ll get 3 different long-run equations for 3 different

dependent variables among your 4 variables. also you’ll get 3 different ECT. hope this

helps.

1) select the variables and open as group.

2) under view select cointegration test

3) select single equation cointegration test

4) under test method choose Engle - Granger

Seye Olasehinde-Williams commented> Pls note that there are also Engle- Granger

based panel cointegration tests

Seye Olasehinde-Williams commente> Also note that Engle- Granger is not most

suitable when you have more than 2 variables in the model.

Sayed Hossain commnted> As per Rank Test, "At Most 1" cointegration we fail to

reject null meaning we accept it. It means there is 1 cointegration relatonship. So

variables PRICE, FDI, INC and POP move together in the long run, So we can run

VECM model. But as per Max Eigen test, we faile to reject "none" meaning that there

is no cointegrating relationship so variables PRICE, FDI, INC and POP do not move

together in the long run. So we are unable to apply VECM model here but unrestricted

VAR model can be applied.

Now which one we should accept? Indeed, Trace and Max Eigen, both statistics are

equally efficient. So you can take decision on the basis of either one. But best would

be if both tests provide the same result.

Younes Azzouz commented> GDP=0.156 CONS - 0.544 EX + 47.79. Notify that EX

isn't significant. In this situation the equation is normalized to GDP which has the

coefficient 1. To make an equation with GDP as dependent variable, all other

variables go to the other side. Automatically, signs get inversed.

Saeed Aas Khan Meo GDP=47+0.15(COSN)-.54(EX)

Ghumro Niaz Hussain Just reverse the signs of normalized coefficients ur LR

Cointegration is GDP=47.78+0.15.69(COSN)-.54*(EX)

Sayed Hossain commented>I have just reversed the sign. So it comes up: GDP=0.

156CONS - 0.544 EX + 47.79. The bracket is

while CONS is significant.

9.

Meo School of Research

Shishir Shakya

Noman Arshed

Hossain Academy Note

Univariate Models |

Multivariate Models |

Ade Kutu

Afolabi Luqman

Abdullah Sonnet

Asad Zaman

Atiq Rehman

Burcu Özcan

Ghumro Niaz Hussain

Muhammad Anees

Mohammad Zhafran

Muzammil Bhatti

Monis Syed

Mine PD

Moulana N. Cholovik

Muili Adebayo Hamid

Nicat Gasim

Najid Iqbal

Nasiru Inuwa

Noman Arshed

Rapelanoro Nady

Saeed Aas Khan Meo

Seye Olasehinde-Williams

Suborno Aditya

Sayed Hossain

Shishir Sakya

Sheikh Muzammil Naseer

Tella Oluwatoba Ibrahim

Younes Azzouz