I was trying to replicate results from Juselius' "The Cointegrated VAR Model".

I have been fine until page 199 on Chapter 11 for Tests of cointegration rank with exogenous variables.

- Code: Select all
`source CATSHandbook_DataRead.src`

source c:\cats2\cats.src

*****************************************************************

* Chapter 11 - Restrictions on alpha *

* - The model with an unrestricted constant *

* - The model with an unrestricted constant and Rb as w.e. *

*****************************************************************

* Unrestricted constant

*

* Illustration 11.1.1. Use unrestricted constant model.

*

@cats(lags=2,noexo,shift,dum,dettrend=drift) 1973:1 2003:1

# lm3rc lyr dpy Rm Rb

# Ds831

# Dt754 Dp764

*

* (a) Use I(1)--Set Rank of Pi and choose 3 cointegrating vectors.

*

* Test for Rb as weakly exogenous.

* (b) Use I(1)--Test for Weak Exogeneity. Input 1 as the number of

* weakly exogenous variables. Set the R value to 1.0 on DRB.

*

* Automated test for weak exogeneity.

* (c) Choose Automated Tests--West Exogeneity. This will produce table 11.1

*

* Joint test of weak exogeneity of yr and db

* (d) Choose I(1)--Test for Weak Exogeneity. Input 2 as the number of weakly

* exogenous variables. For the R matrix, enter a 1.0 in the DRB column

* on the first row, and in the DLYR column on the second row.

* (e) Exit CATS

*

* Illustration 11.2.1. Run CATS with unrestricted constant and Rb as weakly exogenous

*

@cats(lags=2,exo,shift,dum,dettrend=drift) 1973:1 2003:1

# lm3rc lyr dpy Rm

# Rb

# Ds831

# Dt754 Dp764

*

* (a) Do I(1)--Rank Test Statistics

* (b) Do I(1)--Set Rank of Pi and set r=3. Normalize on DPY, LM3RC and RM in that order.

* (c) Do Misc--Short Run Parameters to get the short-run matrices needed to fill in the bottom of

* page 199.

* (d) Do Misc--Residual Analysis to get table 11.3

* (e) Exit CATS

But this code does not provide the result as written out in the book. P-values are very small for rank r=3 where as it is supposed to be large p-value to accept as in the book. Do you possibly know what is going on with this test?

Or did I do something wrong?

Thank you in advance for your thought/advice.