egtestresids.src- Procedure file - requires RATS 7.3 or later
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Options for Selecting Lags
LAGS=number of additional lags [0]
MAXLAGS=maximum number of additional lags to consider [number of observations^.25]
You can use either of these to select either the (maximum) number of additional lags. If you don't use either option, the LAGS default of 0 will be used for METHOD=INPUT and the MAXLAGS default will be used for the others.
METHOD=[INPUT]/AIC/BIC/HQ/TTEST/GTOS
METHOD=INPUT uses the input number of LAGS only. METHOD=AIC/BIC/HQ tests the D-F regressions for everything from 0 to LAGS/MAXLAGS and chooses the minimizer for the chosen criterion. METHOD=TTEST/GTOS starts with the full set of lags and deletes lags as long as the final one has a marginal significance level less than the cutoff given by the SIGNIF option. (GTOS is short for General-TO-Specific).
SIGNIF=cutoff significance level for METHOD=TTEST or GTOS[.10]
Other Options
NVAR=number of endogenous variables in the cointegrating regression, counting the dependent variable [2]
DET=NONE/[CONSTANT]/TREND
Choose what deterministic components were included in the original regression. This changes the critical values.
[PRINT]/NOPRINT
TITLE=Title for output ["Engle-Granger Cointegration Test"]
Example
- Code: Select all
*
* Enders, Applied Econometric Time Series, 3rd edition
* Example from Section 6.6, pp 382-385
* Cointegration analysis of PPP. This carries out the analysis over the
* full sample on the coint_ppp.xls data file.
*
open data coint_ppp.xls
calendar(q) 1973:1
data(format=xls,org=columns) 1973:01 2008:02 ex_ca ex_ja ex_uk p_ca p_ja p_uk p_us p_fr p_sw ex_fr ex_sw
*
* Generate logs of all the series (which will be named logex_ca etc.)
*
dofor s = ex_ca to ex_sw
set %s("log"+%l(s)) = log(s{0})
end dofor s
*
* Compute the dollar values of foreign prices
*
set logf_ca = logp_ca-logex_ca
set logf_ja = logp_ja-logex_ja
set logf_uk = logp_uk-logex_uk
*
* Do ADF tests on the US price level and the dollar-denomimated foreign
* price level.
*
@dfunit(lags=2) logp_us
@dfunit(lags=2) logf_ca
@dfunit(lags=2) logf_ja
@dfunit(lags=2) logf_uk
*
* Do E-G regressions on restricted form (expecting unit slope
* coefficients).
*
linreg logf_ja / resids
# constant logp_us
@egtestresids(nvar=2,maxlags=8,method=aic,title="EG test for PPP in Japan") resids
linreg logf_ca / resids
# constant logp_us
@egtestresids(nvar=2,maxlags=8,method=aic,title="EG test for PPP in Canada") resids
linreg logf_uk / resids
# constant logp_us
@egtestresids(nvar=2,maxlags=8,method=aic,title="EG test for PPP in UK") resids
*
* Do E-G regressions using both price indices (expecting 1,-1 slope
* coefficients under PPP).
*
linreg logex_ja / resids
# constant logp_ja logp_us
@egtestresids(nvar=3,maxlags=8,method=aic,title="EG test for Cointegration in Japan/US") resids
*
linreg logex_ca / resids
# constant logp_ca logp_us
@egtestresids(nvar=3,maxlags=8,method=aic,title="EG test for Cointegration in Canada/US") resids
*
linreg logex_uk / resids
# constant logp_uk logp_us
@egtestresids(nvar=3,maxlags=8,method=aic,title="EG test for Cointegration in UK/US") resids
- coint_ppp.xls
- Data file for example
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