Hi Ron: I think by putting the stationary one first , they are just normalizing the cointegrating<br />vector. if they don't do this, then it's not unique. for example, suppose you have the<br />simple 2 series case y1 and y2.<br /><br />then, if the cointegrating vector = ( B1, B2), then it's also (1, B2/B1).<br /><br />So, by putting the stationary one first ( with a 1 in front of it ) I think all they are saying is that the first element of the vector is 1. So, I'm pretty certain they are just doing to deal wth the non uniqueness of the cointegrating vector and it really doesn't matter as you say.<br /><br />I haven't looked at this material in a long time so it's rusty in my head so hopefully someone else will reply, confirm, correct.<br /><br /><br /><br /><br /><br /><br /><br /><p>On Aug 19, 2009, <strong>RON70</strong> <ron_michael70@yahoo.com> wrote: </p><div class="replyBody"><blockquote style="border-left: 2px solid #267fdb; margin: 0pt 0pt 0pt 1.8ex; padding-left: 1ex"><br />still no single reply. Should I need to design my query in better way?<br /><br /><br /><br />RON70 wrote:<br />> <br />> Hi all, in Lutkepohl, page 250, I found that if there are stationary<br />> variables in integrated system then they must be put in upper r-dimension.<br />> My question is, is that the fact? If I do not do it, is there any problem<br />> in estimation and interpretation? I have done few exercises and found that<br />> parameter estimation is not infected with ordering (except IRF<br />> estimation). Even is page 303 an example is presented wherein inflation<br />> rate variable is taken as 2nd variable, although it looks like a stable<br />> process. <br />> <br />> Can anyone please clarify that? If really ordering is a problem in<br />> presence of a stationary variable, can anyone provide me an example, with<br />> perhaps in R-code so that I can regenerate? <br />> <br />> Thanks<br />> <br /><br />-- <br />View this message in context: <a href="http://www.nabble.com/A-question-on-VECM-tp24985789p25038989.html" target="_blank" class="parsedLink">http://www.nabble.com/A-question-on-VECM-tp24985789p25038989.html</a><br />Sent from the Rmetrics mailing list archive at Nabble.com.<br /><br />_______________________________________________<br /><a href="mailto:R-SIG-Finance@stat.math.ethz.ch" target="_blank" class="parsedEmail">R-SIG-Finance@stat.math.ethz.ch</a> mailing list<br /><a href="https://stat.ethz.ch/mailman/listinfo/r-sig-finance" target="_blank" class="parsedLink">https://stat.ethz.ch/mailman/listinfo/r-sig-finance</a><br />-- Subscriber-posting only.<br />-- If you want to post, subscribe first.<br /></blockquote></div>