My apologies for the broken link to my paper co-authored with Al Gol that was listed in the "April Reading" post on 1 April.
This has now been fixed.
"I’ve a simple but not explicitly answered question within the text books on stationary series. I’m estimating a model with separate single equations (I don’t take into account the interactions among them ). I’ve only non-stationary series in some equations (type 1), only stationary in some (type 2), and a combination of the both in the others (type 3). For the first two cases I apply the usual procedures and for the last case the Pesaran (2011) test. I want to find the short term effects of some variables on the others. I’ve two questions:
1) If the Pesaran test turns out inconclusive or rejects cointegration, what’s the next step ? Differencing all the series and applying an OLS? Or differencing only the non-stationary ones? Or another method?
2) As I mentioned I’m looking for the short-run effects. In the type 2 equations, I guess running an OLS in levels gives the long-run effects. Therefore I run an OLS in differences. Some claim that differencing an already stationary series causes problems. I’m confused. What do you think?"
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