topic Re: proc varmax ECMX (1,0) [no long-run fluctuations] in SAS Forecasting and Econometrics

proc varmax ECMX (1,0) [no long-run fluctuations]

TTB — Mon, 05 Oct 2015 13:26:28 GMT

I have a model in which the dependent variable and independent variables exhibit cointegration and are non-stationary, but the model structure is an ECMX (1,0) which can be interpreted that the long-run dynamics hover near or at zero. Should a different model be used in this case or has anyone else come across this situation?

Re: proc varmax ECMX (1,0) [no long-run fluctuations]

wandas — Tue, 13 Oct 2015 19:35:41 GMT

After conferring with several forecasting experts, we've concluded that this question is not clear would be better handled by contacting Technical Support. Please open a Technical Support Track and include your data and code.

Re: proc varmax ECMX (1,0) [no long-run fluctuations]

TTB — Wed, 04 Nov 2015 17:02:27 GMT

Thanks.... I'm trying to resolve if this model is conceptually sound. Based on an autoregressive p= 1, the Johansen trace test results in cointegration existing between at least 2 of the 3 covariates and when I test for weak exogeneity and Granger causality tests, the model structure results in one dependendent variable (sales) and the other two being independent (gdp and hpi). The end result is a ECMX (1,0) model due to nonstationarity and cointegration with gdp and hpi explaining sales. I was informed that this model structure is conceptually unsound since there is no long run equilibrium for the variables to correct cointegration.