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Engle granger 2 step procedure

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Engle granger 2 step procedure

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    1. Engle granger 2 step procedure

    2. First test the variables for their order of integration Test the level and first and maybe second difference

    4. Start pc-give and go to descriptive statistics for the DF tests

    9. So pictures say non stationary and so do the tests. Repeat for differences and for the other variables

    10. Then start to asses cointegration Start econometric modelling Estimate a simple static equation (no lags)

    18. Now test the residual for sationarity

    21. So add variables until we get cointegration

    24. Now save and test this residual

    27. So now build error correction model

    31. Now just delete the insignificant variables making sure that you do not fail any of the tests until we get a parsimonious model

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