Are there any suggested approaches for using non-stationary series in a VAR model? As per otexts.org:
If the series are non-stationary we take differences to make them stationary and then we fit a VAR model (known as a “VAR in differences”).
Are there any other approaches for creating a forecasting model non-stationary series in a multivariate series?
Any leads on this would be helpful. I'm looking for implementing this model in R.
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Best Answer
To use VAR model for non-stationary series, you have to test the cointegration If there is cointegration you use the model VECM Otherwise a VAR on the first differences of the variables
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