Tuesday, March 14, 2006

st: COINTEGRATION TEST WITH I(0) VARIABLE

I want to see if 4 variables have a long run relationship. The problem is that 3 of them are I(1) and one is I(0). Is it correct if I use the Johansen cointegration Test? or Should I test it with just the 3 I(1) variables? I was thinking about make a VARX with the I(0) variable as exogenous. I can not chance the specification of the variables in levels, so I can not differentiate them or exclude some.

Please help me!!!

Thanks

Mauricio

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