SAS Forecasting and Econometrics

Forecasting using SAS Visual Forecasting, SAS Forecast Server, SAS Econometrics and more
BookmarkSubscribeRSS Feed
TTB
Calcite | Level 5 TTB
Calcite | Level 5

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?

2 REPLIES 2
wandas
SAS Employee
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.
TTB
Calcite | Level 5 TTB
Calcite | Level 5

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.