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<p class="MsoNormal"><span style="" lang="EN-US">Hi
R-users,</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">I try to deal
with cointegration in R and estimate an Error Correction Model (ECM) in a
bivariate case in which I consider two variables:</span></p>
<p class="MsoListParagraphCxSpFirst" style="text-indent: -18pt;"><span style="font-family: Symbol;" lang="EN-US"><span style="">·<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;">
</span></span></span><span style="" lang="EN-US">Pt:
index house prices in France from 1996:Q1 to 2009:Q3 (log dependent variable)</span></p>
<p class="MsoListParagraphCxSpLast" style="text-indent: -18pt;"><span style="font-family: Symbol;" lang="EN-US"><span style="">·<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;">
</span></span></span><span style="" lang="EN-US">Xt:
amount that households can borrow (log explanatory variable). Xt captures the
role of credit, income and interest rate as drivers of the french housing
demand.</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">Data are in
“fr-demand-house.csv”.</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">The final
aim is to estimate the long run relationship between houses prices (Pt) and the
credit (Xt) in France :</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">Pt = </span><span style="" lang="EN-US">α</span><span style="" lang="EN-US"> + </span><span style="" lang="EN-US">ϕ</span><span style="" lang="EN-US"> Xt <sub></sub></span></p>
<p class="MsoNormal"><span style="" lang="EN-US">I wish to
estimate a general specification of the ECM as follows :</span></p>
<p class="MsoNormal"><span style="" lang="EN-US"></span></p><p class="MsoNormal"><span style="" lang="EN-US">Δ</span><span style="" lang="EN-US">Pt=</span><span style="" lang="EN-US">λ</span><span style="" lang="EN-US">(Pt-1-</span><span style="" lang="EN-US">α</span><span style="" lang="EN-US"> - </span><span style="" lang="EN-US">ϕ</span><span style="" lang="EN-US"> Xt-1)+</span><meta http-equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><style>
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</style><span style="font-size: 11pt; line-height: 115%; font-family: "Calibri","sans-serif";" lang="EN-US">Σ</span><span style="" lang="EN-US">(</span><span style="" lang="EN-US">Δ</span><span style="" lang="EN-US">Xt-i)</span><span style="font-size: 11pt; line-height: 115%; font-family: "Calibri","sans-serif"; position: relative; top: 5.5pt;"></span><span style="" lang="EN-US">+</span><meta http-equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CUsers%5CGautier%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><style>
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</style><span style="font-size: 11pt; line-height: 115%; font-family: "Calibri","sans-serif";" lang="EN-US">Σ</span><span style="" lang="EN-US">(</span><span style="" lang="EN-US">ΔPt-i)</span><span style="font-size: 11pt; line-height: 115%; font-family: "Calibri","sans-serif"; position: relative; top: 5.5pt;"></span><span style="" lang="EN-US"></span></p>
<p class="MsoNormal"><span style="" lang="EN-US"> </span></p>
<p class="MsoNormal"><span style="" lang="EN-US">First, following
the methodology presented in the book of B. Pfaff I bought, I already concluded
that Pt and Xt are cointegrated <span style=""> </span>I(1)
with ur.df (ADF test ) and ca.po (Phillips-Ouliaris Method) functions.</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">Second, how
can I do :</span></p>
<p class="MsoListParagraphCxSpFirst" style="text-indent: -18pt;"><span style="" lang="EN-US"><span style="">1.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="" lang="EN-US">to choose optimal number of lag in this general specification for the two cointegrated variables Pt </span><span style="" lang="EN-US">(ΔPt-i) </span><span style="" lang="EN-US">and Xt (</span><span style="" lang="EN-US">Δ</span><span style="" lang="EN-US">Xt-i)</span><span style="" lang="EN-US">?</span></p>
<p class="MsoListParagraphCxSpLast" style="text-indent: -18pt;"><span style="" lang="EN-US"><span style="">2.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="" lang="EN-US">to add a dummy variable for the
first quarter of 2009 (dumQ1-2009) to test the collapse of houses prices in
France at the beginning of 2009 ?</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">Can anyone
help?</span></p>
<p class="MsoNormal"><span style="" lang="EN-US">thanking
you in advance,</span></p>
<p class="MsoNormal"><span style="" lang="EN-US"> </span></p>
<p class="MsoNormal"><span style="" lang="EN-US">Gautier
RENAULT</span></p>