

I am currently analyzing a data set using panel cointegration. Like with any other cointegration method the variables have to be non-stationary. For my specific case (German commercial real estate market) I find the variables "total stock of office space" and "vacancy rates" to be non-stationary using standard unit-root tests. 
>From theoretic considerations however it is clear that the vacancy rate has to be between 0 and 1 and also that the office space is unlikely to wander off to any arbitrary values.

how would you deal with such a situation?

Do you think it is possible to have "technical non-stationarity" in the sense that shocks in the past have a permanent impact on the series but that the variable exhibits a random walk behavior only within certain bounds? If that would be the case then it would be necessary to treat the vacancy rate as a non-stationary variables since ignoring this would lead to spurious regression.

Thank you for your contributions


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