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Is it reasonable to consider cointegration between 4 series, where 3 of them are $I(1)$, and one of them is $I(0)$?

Ferdi
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David
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1 Answers1

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No, you can't consider cointegration, because by definition of what it means to be cointegrated, the series all have to be integrated. In your case, all four series have to be I(1), and there must exist some linear combination of them that is I(0), in order for them to be cointegrated.

The Laconic
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  • Thank you. Then how to find the long-run equilibrium parameters? – David Aug 03 '18 at 16:13
  • You can still do cointegration analysis on the three I(1) series. If you find some cointegrating relationship(s), the fourth variable could be added to the error-correction model as an exogenous variable. – The Laconic Aug 03 '18 at 16:20