I am trying to run a Johansen-Procedure in a set of macroeconomic variables (GDP, credit outstanding and industrial production). I am working with them in level.
How should I interpret the following result?
###################### # Johansen-Procedure # ###################### Test type: maximal eigenvalue statistic (lambda max) , without linear trend and constant in cointegration Eigenvalues (lambda): [1] 6.999273e-01 3.188663e-01 1.303763e-01 5.099467e-02 -6.157574e-17 Values of teststatistic and critical values of test: test 10pct 5pct 1pct r <= 3 | 3.04 7.52 9.24 12.97 r <= 2 | 8.10 13.75 15.67 20.20 r <= 1 | 22.27 19.77 22.00 26.81 r = 0 | 69.82 25.56 28.14 33.24 Eigenvectors, normalised to first column: (These are the cointegration relations) pib.l1 pim.l1 pmca.l1 credpf.l1 constant pib.l1 1.000000 1.0000000 1.0000000 1.0000000 1.0000000 pim.l1 3.837837 1.4510004 -1.8089739 -0.5802552 -0.3392558 pmca.l1 -1.521082 -0.7640412 -1.2570908 -1.3764531 -0.6812554 credpf.l1 -0.334400 -0.5162337 0.9390526 0.3000718 -0.1507749 constant -318.355047 -149.2844982 -37.8967674 -39.9517618 -42.5839669 Weights W: (This is the loading matrix) pib.l1 pim.l1 pmca.l1 credpf.l1 constant pib.d 0.01887772 -0.20780832 -0.02013903 0.03625849 1.835250e-14 pim.d -0.04717478 -0.24886913 -0.01666137 0.03942148 4.796621e-14 pmca.d 0.05566538 -0.03881974 -0.01206322 0.11316466 -9.723535e-15 credpf.d 0.02345645 -0.08972929 -0.20632548 0.12360292 2.783076e-14 My goal is to estimate the best VEC model so I can forecast those variables.
Thank you very much!
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Best Answer
I think we need to look at cointegration first. There is a good article for that and the subject you ask. Johansen Test For Cointegrating Time Series