Dear all
I have a basic question. In time series analysis, I have a (level) variable that is nonstationary. I am interested in estimating shocks to this level variable, and then use these shocks in another time series regression. I try to make is simple here:
I have done the following:
newey x L.x, lag(4)
predict shock, res
When I test the stationarity of the residuals, I find they are stationary. I then use these shocks in another regression:
newey f.gdp shock, lag(4)
My question is that:
Does it make sense to use these residuals as shocks to x even if x is nonstationary (knowing that the residuals are stationary) ?
Thanks
I have a basic question. In time series analysis, I have a (level) variable that is nonstationary. I am interested in estimating shocks to this level variable, and then use these shocks in another time series regression. I try to make is simple here:
I have done the following:
newey x L.x, lag(4)
predict shock, res
When I test the stationarity of the residuals, I find they are stationary. I then use these shocks in another regression:
newey f.gdp shock, lag(4)
My question is that:
Does it make sense to use these residuals as shocks to x even if x is nonstationary (knowing that the residuals are stationary) ?
Thanks
Comment