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Quartz | Level 8
Hi All,
Can we combine VARMAX procedure with Difference in Differences method? Here is the context of my study:
I have 3 time series, Y1t, Y2t and Xt, in which Y1t and Y2t change over time with changes in Xt. However, I also have a binary variable, Z, which is an indicator of a policy shift in the middle of the time series that only affects Y1t. So, after a specific point in time, the values of Y1t will also be affected by the policy implementation Z while there is no policy effects on Y2t, time series Xt will continue to impact both Y1t and Y2t after the policy implementation.
One thing that I can think of is to change Z into a time series with values equal to 0 before the policy shift date and 1 after the policy shift date. Does that work? 
SAS Employee

Hi @niam , 


Yes, your idea of including your indicator variable, Z, in the equation for Y1 along with your other input variable, X, in your Y1 and Y2 equations is a reasonable approach.  For example, you can specify the following MODEL statement in PROC VARMAX, where <options> is your list of desired options:


model y1=x z , y2=x / <options> ;

For more details on the MODEL statement syntax when a different set of input variables is used in each equation, please see the following link:  


I hope this helps!




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