SWDOLS - Stock-Watson Dynamic OLS Estimator
Posted: Thu May 05, 2011 11:50 amThis is a revised version of the DOLS estimator for cointegrating vectors from Stock and Watson(1993), "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems", Econometrica, vol 83, 1097-1107. This was revised in May 2011 to include the DET option allowing both constant and constant and trend as deterministic components. This also added the TITLE option.
This is used repeatedly in the King, Plosser, Stock, Watson replication (http://www.estima.com/forum/viewtopic.php?f=8&t=1053).
@SWDOLS(options) start end
# list of endogenous variables
Options
RANK=number of cointegrating vectors to estimate [1]
This estimates "rank" equations, with the first "rank" endogenous variables used as the LHS variables of these, while the remaining variables are the RHS variables.
LAGS=number of leads and lags of the differences of the RHS variables to include [1]
This is in addition to the current level and the current difference. Note that each additional lag takes two data points out of the data set (one lag and one lead) and adds two regressors per RHS variable. As a result, you can very quickly run out of degrees of freedom with increasing lags, particularly if the number of RHS variables is high.
DET=[CONSTANT]/TREND
Deterministic components to include
AR=number of lags in the AR(VAR if rank>1) used in computing the spectral density matrix at 0 frequency.
TITLE=title for report ["Dynamic OLS Estimates"]
This is used repeatedly in the King, Plosser, Stock, Watson replication (http://www.estima.com/forum/viewtopic.php?f=8&t=1053).
swdols.src- Procedure file - requires RATS 7.3 or later
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@SWDOLS(options) start end
# list of endogenous variables
Options
RANK=number of cointegrating vectors to estimate [1]
This estimates "rank" equations, with the first "rank" endogenous variables used as the LHS variables of these, while the remaining variables are the RHS variables.
LAGS=number of leads and lags of the differences of the RHS variables to include [1]
This is in addition to the current level and the current difference. Note that each additional lag takes two data points out of the data set (one lag and one lead) and adds two regressors per RHS variable. As a result, you can very quickly run out of degrees of freedom with increasing lags, particularly if the number of RHS variables is high.
DET=[CONSTANT]/TREND
Deterministic components to include
AR=number of lags in the AR(VAR if rank>1) used in computing the spectral density matrix at 0 frequency.
TITLE=title for report ["Dynamic OLS Estimates"]