Fri Dec 5 02:33:28 EST 2008

What about lag order in VECM and VAR.
In the command reference: The number of lags in the VECM itself (where the dependent variable is given as a first difference) is one less than order.
These lag order terms are the same or different?

----- Original Message ----
From: Riccardo (Jack) Lucchetti <r.lucchetti at univpm.it>
To: Gretl list <gretl-users at lists.wfu.edu>
Sent: Friday, December 5, 2008 4:03:07 PM

On Thu, 4 Dec 2008, Allin Cottrell wrote:

> On Thu, 4 Dec 2008, Sven Schreiber wrote:
>
>> Ok, let's get explicit then...
>
> Thanks, Sven, I think I finally get it.  We advertise an "ADF test
> with lag order p".  Do we mean:
>
> A. A test regression that includes p lags of the dependent
> variable in that regression (namely, the first difference of the
> variable to be tested), OR
>
> B. A test appropriate for the alternative hypothesis that the
> variable in question follows an AR(p) process in its level rather
> than a random walk (so that the test regression should contain p-1
> lags of the regressand) ?
>
> If I'm reading you right, you know that for gretl the answer is A
> (as indeed it is) but you doubt whether this is stated clearly
> enough.

We free software buffs do have a talent for creating looong mailing list
threads out of the simplest things. Since it looks like this thread is
dying out, I'll put my 2 cents in to revive it: shouldn't we be consistent
with the Johansen tests (\lambda-max and trace)? Those are just the
multivariate generalisation of ADF, and we use B there.

I know, I should have stayed quiet :-)

Riccardo (Jack) Lucchetti
Dipartimento di Economia
Università Politecnica delle Marche

r.lucchetti at univpm.it
http://www.econ.univpm.it/lucchetti