When should I use Johansen Test of Co-integration?
Assume three variables such as Y, X1 and X2 are integrated of order 1, that is I(1), meaning that variables are non stationary at level but if I convert them into first differenced, they will become stationary. Indeed, it is the condition to run Johansen test of co-integartion. Now, I shall put all three non-stationary variables (that is level data) in EVIEWS platform and run the Johansen test to check whether variables are co-integrated or not.
To know further, visit Hossain Academy
Assume three variables such as Y, X1 and X2 are integrated of order 1, that is I(1), meaning that variables are non stationary at level but if I convert them into first differenced, they will become stationary. Indeed, it is the condition to run Johansen test of co-integartion. Now, I shall put all three non-stationary variables (that is level data) in EVIEWS platform and run the Johansen test to check whether variables are co-integrated or not.
To know further, visit Hossain Academy
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