Econometrics Beat - Dave Giles' Blog - ARDL Modelling in EViews 9

8/23/2017 Econometrics Beat: Dave Giles' Blog: ARDL Modelling in EViews 9
More Next Blog» venkateshhari8@gmail.com Dashboard Sign Out
Econometrics Beat: Dave Giles' Blog
Home Data Code Readers' Forum Former Students Jobs
F r i d a y, J a n u a r y 9 , 2 0 1 5 MathJax
ARDL Modelling in EViews 9 About Me
Dave Giles
My previous posts relating to ARDL models (here and here) have drawn a lot of hits. So, it's great to see that EViews
9 (now in Beta release - see the details here) incorporates an ARDL modelling option, together with the associated L'Amable, ON, Canada
"bounds testing". I'm now retired as
Professor Emeritus from
This is a great feature, and I just know that it's going to be a "winner" for EViews. the University of Victoria, Canada. I
still research in Econometrics &
applied Statistics.
It certainly deserves a post, so here goes!
View my complete profile
First, it's important to note that although there was previously an EViews "add-in" for ARDL models (see here and here),
this was quite limited in its capabilities. What's now available is a full-blown ARDL estimation option, together with Search This Blog
bounds testing and an analysis of the long-run relationship between the variables being modelled.
Search
Here, I'll take you through another example of ARDL modelling - this one involves the relationship between the retail
price of gasoline, and the price of crude oil. More specifically, the crude oil price is for Canadian Par at Edmonton; and Total Pageviews
the gasoline price is that for the Canadian city of Vancouver. Although crude oil prices are recorded daily, the gasoline
prices are available only weekly. So, the price data that we'll use are weekly (end-of-week), for the 4 January 2000 to 16
July 2013, inclusive.
4,660,347
The oil prices are measured in Candian dollars per cubic meter. The gasoline prices are in Canadian cents per litre, and
they exclude taxes. Here's a plot of the raw data:
Subscribe To Ths Blog
Posts
Comments
Follow by Email
Email address... Submit
Featured Post
Specification Testing With

Very Large Samples
I received the following email query

a while back: "It's my understanding
that in the event that you have a
large sample size (...
The data are available on the data page for this blog. The EViews workfile is on the code page.
I'm going to work with the logarithms of the data: LOG_CRUDE and LOG_GAS. There's still a clear structural break in the
data for both of these series. Specifically there's a structural break that occurs over the weeks ended 8 July 2008 to 30
December 2008 inclusive. I've constructed a dummy variable, BREAK, that takes the value one for these observations, and
zero everywhere else.
The break doesn't occur at just a single point in time. Instead, there's a change in the level and trend of the data that
evolves over several periods. We call this an "innovational outlier", and in testing the two time series for unit roots, I've
taken this into account.
9 min to Spreed
http://davegiles.blogspot.in/2015/01/ardl-modelling-in-eviews-9.html 1/26
In a recent post I discussed the new "Breakpoint Unit Root Test" options that are available in EViews 9. They're perfectly
suited for our current situation. Here's how I've implemented the appropriate test of a unit root in the case of the
LOG_CRUDE series:
The result is:
My Books
Amazon: Author Central
Google Scholar h-index
My h-index
We wouldn't reject the hypothesis of a unit root at the 5% significance level, and the result is marginal at the 10% level. The Erdos Number Project
The corresponding result for the LOG_GAS series is: My Erdos Number is 4
Popular Posts (Last 30 Days)
ARDL Models - Part

II - Bounds Tests
An Overly Confident (Future)

Nobel Laureate
Testing for Granger Causality
ARDL Modelling in
EViews 9
ARDL Models - Part I
In this case we'd reject the null hypothesis of a unit root at the 5% significance level, but not at the 1% level. Overall, the
results are somewhat inconclusive, and this is precisely the situation that ARDL modelling and bounds testing is designed Blog Archive
for. Applying the unit root tests to the first-differences of each series leads to a very clear rejection of the hypothesis
► 2017 (34)
that the data are I(2), which is important for the legitimate application of the bounds test below.
► 2016 (55)
Now, let's go ahead with the specification and estimation of a basic ARDL model that explains the retail price of gasoline ▼ 2015 (87)
in terms of past values of that price, as well as the current and past values of the price of crude oil. We can do this in the ► December (9)
same way that we'd estimate any equation in EViews, but we select the "Estimation Method" to be "ARDL" (see below):
► November (1)
► October (6)
► September (5)
► August (9)
► July (3)
► June (9)
► May (10)
► April (14)
► March (7) 9 min to Spreed
► February (9)
▼ January (5)
► 31 (1)
► 24 (1)
► 11 (1)
▼ 09 (1)
ARDL Modelling in EViews 9
► 01 (1)
► 2014 (167)
► 2013 (220)
► 2012 (173)
► 2011 (131)
Follow @DEAGiles
Labels
2SLS 3SLS American Statistical

Notice that I've set the maximum number of lags for both the dependent variable and the principal regressor to be 8. This Association ARCH ARDL Models ARIMA
means that 72 different model specifications will be considered, allowing for the fact that the current value of models Asymptotic theory
LOG_CRUDE can be considered as a regressor. Also, notice that I've included the BREAK dummy variable, as well as an Autocorrelation Bayesian
intercept and linear trend as (fixed) regressors. (That is, they won't be lagged.) inference Bias correction Big data
Binomial distribution Blogs Bootstrap
Business cycle Canadian data Careers
Using the OPTIONS tab, let's select the Schwarz criterion (SC) as the basis for determining the lag orders for the
ChiSquare distribution Circular data Co-
regressors:
Cointegration Computing
authors
Conferences Confidence intervals
Consistency Consumer demand
Continuous-time model Cooking Count
data Courses CPI Data Data Science
Degrees of freedom Difference-in-
differences Distributed lags
Distributions Dummy variables
Dynamic model Economic growth
Economic statistics Estimation
EViews Extreme value theory FIML
Financial econometrics finite sample
inference Forecasting Freeware GLS
GMM Goodness of fit gr Grad.
The model which minimizes SC will be chosen. This results in a rather parsimonious model specification, as you can see: students Granger causality
Graphs Gretl H-P filter
Heteroskadasticity Heteroskedasticity
History of
econometrics History of
statistics Humour
Hypothesis testing
Identification Information theory
Instrumental variables Jobs LDV
models LIML macroeconometrics
Mathematics Mean squared error
Measurement error meta-analysis
Microeconometrics MIDAS models
Miscellaneous MLE model
averaging Monte Carlo
Multicollinearity Music NBER New
Zealand Nobel Prize Nonlinear
models nonparametric inference
Normal distribution Nuisance parameters
NZ data OLS p-values Panel data
Personal gripes Poisson distribution
Power PPP pre-testing Publishing
Quotes R Regression
models Replication Robust
estimation RoyalStatistical Society
Sample selection Seasonal adjustment
Seminars SHAZAM Sheep Simulation
Simultaneous equations
models Specification testing
I mentioned in an earlier post on Information Criteria that SC tends to select a simpler model specification than some Sports STATA Statistics Statistics
other information criteria. So, instead of SC, I'm going to use Akaike's Information Criterion (AIC) for selecting the lag Canada Statistics NZ Structural breaks
SURE model Survey data survival
structure in the ARDL model. There's a risk of "over-fitting" the model, but I definitely don't want to under-fit it. Here's
what we get: analysis teaching Teaching
econometrics Temporal
aggregation Time series Tobit
unit
Trends UK data Uniform distribution
roots VAR models VECM models
Videos Weak Instruments
Blogroll
Marginal Revolution
StatsBlogs 9 min to Spreed
R-bloggers
Stats Chat
Not Trampis
Revolutions
FlowingData
CONVERSABLE ECONOMIST
Statistical Modeling, Causal

Inference, and Social Science
The Endeavour
quandl blog
Economist's View
Marc F. Bellemare
Roger Farmer's Economic

Window
No Hesitations
Kathie Wright
The Enlightened Economist
SmallTorque
Worthwhile Canadian
Initiative
It's important that the errors of this model are serially independent - if not, the parameter estimates won't be consistent Stochastic Trend
(because of the lagged values of the dependent variable that appear as regressors in the model. To that end, we can use
the VIEW tab to choose, RESIDUAL DIAGNOSTICS; CORRELOGRAM - Q-STATISTICS, and this gives us the following results: EViews
Eran Raviv
MacroMania
God plays dice
The Grumpy Economist
Freakonometrics
Econ Review
ECONJEFF
Dead For Tax Reasons
Allan W. Gregory's Blog
Hyndsight
Core Economics
Causal Analysis in Theory and

Practice
DiffusePrioR
FocusEconomics Blog
Carol's Art Space
Econ Academics Blog
William M. Briggs
The p-values are only approximate, but they strongly suggest that there is no evidence of autocorrelation in the model's
residuals. This is good news!
Now, recall that, in total, 72 ARDL model specifications were considered. Although an ARDL(4,2) was finally selected, we
can also see how well some other specifications performed in terms of minimizing AIC. Selecting the VIEW tab in the
regression output, and then choosing MODEL SELECTION SUMMARY; CRITERIA GRAPH from the drop-down, we see the "Top
Twenty" results:
9 min to Spreed
CPI +1.7 % Chg. from Yr.

Ago on Jul 2017
Civ. Unemploy. Rate 4.3

% on Jul 2017
10-Yr. Treas. Rate 2.18

% on 2017-08-21
Real GDP +2.6 %, Comp.

Annual Rate of Chg.
on Q2 2017
IP +0.2 % Chg.
on Jul 2017
(You can get the full summary of the AIC, SC, Hannan-Quinn, and adjusted R2 statistics for all 72 model specifications if Payroll Employment
+209 Chg., Thous. of
you select CRITERIA TABLE, rather than CRITERIA GRAPH.)
Persons on Jul 2017
One of the main purposes of estimating an ARDL model is to use it as the basis for applying the "Bounds Test". This test is
discussed in detail in one of my earlier posts. The null hypothesis is that there is no long-run relationship between the
... and 498,000+ more
variables - in this case, LOG_CRUDE and LOG_GAS.
series in FRED
In the estimation results, if we select the VIEW tab, and then from the drop-down menu choose COEFFICIENT
DIAGNOSTICS; BOUNDS TEST, this is what we'll get:
We see that the F-statistic for the Bounds Test is 32.38, and this clearly exceeds even the 1% critical value for the upper
bound. Accordingly, we strongly reject the hypothesis of "No Long-Run Relationship".
The output at this point also shows the modified ARDL model that was used to obtain this result. The form that this
model takes will be familiar if you've read my earlier post on bounds testing.
In the estimation results for our chosen ARDL model, if we select the VIEW tab, and then from the drop-down menu
choose COEFFICIENT DIAGNOSTICS; COINTEGRATION AND LONG RUN FORM, this is what we'll see:
9 min to Spreed
The error-correction coefficient is negative (-0.2028), as required, and is very significant. Importantly, the long-run
coefficients from the cointegrating equation are reported, with their standard errors, t-statistics, and p-values:
So, what do we conclude from all of this?
First, not surprisingly, there's a long-run equilibrium relationship between the price of crude oil, and the retail price of
gasoline.
Second, there is a relatively quick adjustment in the price of gasoline when the price of crude oil changes. (Recall that
the data are observed weekly.)
Third, a 10% change in the price of crude oil will result in a long-run change of 7% in the price of retail gasoline.
Whether or not these responses are symmetric with respect to price increases and price decreases is the subject of some
on-going work of mine.
© 2015, David E. Giles
Posted by Dave Giles at 12:40 PM
Labels: ARDL Models, Cointegration, Information theory, Structural breaks, Time series, unit roots
205 comments:
Anonymous January 9, 2015 at 2:41 PM
As usual fantastic! The more detailed instructions, the better for this amateur. I enjoy trying to duplicate your steps.
Sometimes the code is too complicated however. Thank you. It is very enjoyable to see economic issues of the day analyzed,
along with explanations that help one to learn how to replicate the processes. Right now the price of Brent related to world
excess supply or deficit supply compared to world demand seems confusing. There seems to be no relationship. Any chance
of a post on the relationship of Brent price to the excess or deficit supply When I figure-out how to select a profile other
than anonymous.
Reply
JAWAD KAZMI January 13, 2015 at 12:51 AM
Sir, Can we apply ARDL bound testing to analyze two co-integration relations between the same variables (x and y). e.g. X c
Y and Y c X.
Reply
Replies
Dave Giles January 13, 2015 at 9:32 AM
If X is cointegrated with Y, then Y MUST be cointegrated with X.
Reply

9 min to Spreed
Thank you very much for this wonderful blog Prof. Giles! I have questions concerning ARDL(p,q) bounds-testing.
Assume I have X-variable(s) which cannot have a unit-root; for instance a dummy-variable for certain events (like
macroeconomic shocks) and its lagged values. Can I include this (these) variable(s) in the "ARDL bounds-testing approach"?
Such a dummy-variable, name it SHOCK, would be rather similar to your “BREAK” variable, I guess. The coefficient on
D_SHOCK would then pinpoint the short-run effect of the shock and the coefficient on SHOCK would represent the long-run
impact of the macroeconomic shock (although SHOCK is I(0) and cannot be cointegrated with Y)? The bounds-test for
cointegration would be an F-test on joint significance of the lagged Y and lagged X variables (not including SHOCK)?
Thank you very much again!
Reply
Replies
That's correct.
Anonymous September 15, 2015 at 11:13 PM
Dear Prof. Dave, I have a model with one dummy variable (crisis). This dummy is set from 1997-1999 for crisis (1)
and other years (0) for non-crisis. Then, when I run breakpoint unit root test in level, I got different break date
for different variables. But when I run it in 1st difference, I got the same break date (1997) for different
variables, all variables stationary in 1st difference. So, can I still put this dummy variable using 1997-1999 in the
model? or only 1997 ? The problem is, if I put only 1997 as crisis year, the dummy has insignificant coefficient.
Thank you
Dave Giles September 16, 2015 at 7:58 AM

If you have the dummy set to for just one period, that's equivalent to just omitting that observation from the
model (see my "Dummies for Dummies" post). I haven't seen your model or data, but I would suggest you leave the
dummy set for 1997-1999.
Anonymous May 2, 2016 at 12:52 PM
Dear Prof.,
Referring to the last sentence of the January 18, 2015 question, that says 'The bounds-test for cointegration
would be an F-test on joint significance of the lagged Y and lagged X variables (not including SHOCK)?', how can
we do it in EViews?
Thank you
Dave Giles May 2, 2016 at 1:15 PM
Select coefficient tests, Wald test.
Reply
Anonymous February 17, 2015 at 12:39 PM
Another excellent post! Thanks for all the information.
Question - when I downloaded and plotted the data for gas and oil in a scatter, they appeared to have a linear relationship.
In some work I'm doing, the variables seem to have an exponential relationship. Something like y = x1 + x1^2 + x2 seems to
fit the data much better than y = x1 + x2. Would an ALDR still work in this case? Would I want to include lags of of the x1^2?
Would it enter the model a "Fixed Regressor" like "BREAK" in your example?
Unfortunately, I am stuck with Eviews 8 for now. The lag selection tools are making me green with envy.
Thanks sir!
Reply
Replies
Dave Giles February 17, 2015 at 12:44 PM
Yes, that's correct on all counts. If you have a legitimate version of EViews 8.1 on your machine, you can
download the Beta version of EViews 9 for free from here: http://register1.eviews.com/beta/
Reply
Oyeleye Olalekan February 19, 2015 at 1:07 AM
please sir, can you give an example on how to go through the nonlinear ARDL model
Reply
Replies
resbaby July 13, 2015 at 4:07 AM
that was also my question
Reply
Anonymous March 12, 2015 at 11:56 AM

9 min to Spreed
plz sir clear my confusion about F test... can we use Pesaran et al. table for small sample size or will go for Naryan table? plz
answer me as soon as possible
thnx
Reply
Replies
Dave Giles March 12, 2015 at 1:12 PM
Naryan table.
ham you August 17, 2015 at 4:05 AM
Critical values for ARDL bounds Tests (Narayan, 2004):

"Reformulating Critical Values for the Bounds Fstatistics Approach to Cointegration: An Application to the Tourism
Demand Model for Fiji".
http://www.researchgate.net/publication/268048533_Reformulating_Critical_Values_for_the_Bounds_F-
_statistics_Approach_to_Cointegration_An_Application_to_the_Tourism_Demand_Model_for_Fiji
Reply
Anonymous April 16, 2015 at 8:11 AM
Dear Dave
Thank you ofr all these explanations. Howver, I would to ask you please how we can do short and long run multipliers
graphics with Eviews.
Sincerely
Reply
Hiển Bùi Quang April 18, 2015 at 8:05 PM
Can I get eview 9 demo since Apr.19? I have submitted form but I didn't find any email reply.
Did you know how to get it?
Thank you very much!
Reply
Replies
Dave Giles April 18, 2015 at 8:21 PM
You'll have to contact EViews - I don't work for them!
Reply
Hiển Bùi Quang May 7, 2015 at 9:16 AM
Dear Prof.,
Regarding to "Breakpoint Unit Root Test" compare with "Unit Root Test", is there any benefit or improvement?
Thank you!
Reply
Replies
Dave Giles May 7, 2015 at 10:25 AM
If you have structural breaks you should not use the usual unit root tests (e.g., ADF) without modification.
Reply
Muhammed Şehid GÖRÜŞ May 7, 2015 at 11:06 AM
Hello Sir.I run ARDL bound test method and find cointegration bw variables. Than I employ short-run and long-run analysis. In
the short-run, I found min. in akaike in X(0to-1) =-4,54 rather than X(0to-5) =-4,53. But, there is a normality(JB) problem in
the first one. May I choose 0to-5 or ignore the normality problem in the first one. Moreover, I have heteroskedasticity
problem in my estimations both bound test, short-run and ECM granger causality tests. Is it a signiicant problem for time
series. Thx for interest and help.
Reply
Replies

I would use 0 to -5, and I wouldn't be too worried about teh heteroskedasticity issue.
Muhammed Şehid GÖRÜŞ May 7, 2015 at 11:19 AM
appreciation prof.
Reply
gazman May 23, 2015 at 12:14 PM 9 min to Spreed
Thanks for this post, it's really illuminating. However, I would like to know how we can do a causality test in the ARDL
framework. Specifically, if Bounds test shows that X and Y are cointegrated, then (we recall from your earlier post that when
variables are cointegrated, there would be at least a unidirectional causality between them) how can we do the Granger
causality test in Eviews 9?
Reply
Replies

By estimating a VAR model - not an ARDL model. I have several posts about this.
Reply
ΠΑΛΑΙΟΣ ΠΑΝΑΓΙΩΤΗΣ May 24, 2015 at 6:11 PM
I have a model which is not linear...y=c(1)+c(2)*(x^2)+c(3)*(z^2). Can I apply the ARDL method for cointegration in this model
? If yes, how can I transfrom this model in a ARDL model ?
Reply
Replies
Your model is, in fact, linear - linear in the parameters, and that's all that matters. Just re-label X1=X^2, and
X2=Z^2, and then proceed in the usual way.
Thank you very much.
One more question...What about this model? y=c(1)+c(2)*x*w+c(3)*(z^2) ? Do I re-label x*w as, lets say q, and
proceed in the usual way?
Yes, that's right.
Reply
mar sk May 26, 2015 at 8:43 AM
Can I cointegrate a Cobb Douglas function with an ARDL(or with any other method for cointegration), without using its
logarithmic form?
Reply
Replies
No, certainly not exactly. If |x| < 1 you could use the Taylor series approximation for log(1+x), namely, log(1+x) =
x - (x^2)/2 + .......... and go from there.
Reply
mar sk May 26, 2015 at 8:44 AM
This comment has been removed by a blog administrator.
Reply
Anonymous May 28, 2015 at 11:39 AM
Dear Sir,
My data seems to have several structural breaks...do I need to correct for those using Bai-Perron...can this be done in eviews
9
Reply
Replies
EViews 9 includes the Bai-Perron test.
Reply
Dear Sir
Thanks for the reply regarding Bai-Perron test...however I could not find it in eviews9.. 9 min to Spreed
1. if you could pls tell the location.
2. I am dealing with interest rate date, on quarterly basis since 1996q1, which is showing immense oscillations over the
entire period and is following no set pattern...should this be taken as structural breaks or can be adjusted by only taking
time.
3. When I attempted doing without any dummy variables in microfit, it does not pass the CUSUMQ test and suggests to
incorporate a dummy variable for cr.
4. For optimal no. of lags in ardl, can we get them from eviews9 via the automatic lag selection criteria and then carry the
work in microfit. Similarly suggest the same for the structural break.
Reply
Replies

In EViews, the HELP tab will give you the information you need to locate and use Bai-Perron.
Reply
Keep up the good work Dave! I just ran the ARDL model using monthly data and obtained results, BUT, my model exhibits
serial correlation past the 11th lag. The Q-stats from lag 0-11 are not serially correlated but past that, (12 to lag 36) are
serially correlated. I have (1) included dummies (2) ran the top 8 models as selected by AIC (3) even tried using logs..
Any thoughts on this? I truly appreciate your help.
Reply
Replies
Dave Giles July 2, 2015 at 2:05 PM
Please see my reply to "Anonymous" immediately below. Given what you've tried already, I'd suspect omitted
regressors.
Reply
Thanks for the post Dave. I'm running the same type of model (ARDL) using monthly data but I cannot seem to get rid of
serial correlation appearing after the 11th lag in the Q-stats despite trying different specifications.
Any thoughts?
Reply
Replies
It could be the functional form - logs or levels? The other thing that comes to mind is a mis-specification through
the omission of one or more regressors. Are the data seasonally adjusted, or have you included seasonal dummy
variables? If the latter, explore if they should be simply additive, or if they should interact with one or more of
the regressors. Bottom line - remaining autocorrelation is probably a result of model mis-specification.
Reply
Thanks! I'm looking at the relationship between unemployment and oil prices using both logs and levels. I have also used
these dummies as regressors: @EXPAND(@MONTH, @DROPFIRST)
Still getting Serial correlation after the 11th lag.
What do you think?
This is fun but it can get old :)
Reply
Replies
It sounds to me as if you are missing some relevant regressors.
Anonymous June 2, 2015 at 11:57 AM
Thanks Dave.
Reply
9 min to Spreed
Anonymous June 10, 2015 at 10:36 PM
Dear Prof,
In ARDL model Is there a way to get impulse response functions from error correction model (not from VECM) with eviews 9
or manually by excel?
Reply
Replies
Dave Giles June 11, 2015 at 9:08 AM

Not that I'm aware of, but why not ask on the EViews User Forum at http://forums.eviews.com/ .
Reply
I am so glad to see your power posts. My questions are that after running ARDL cointegration test for a multivariate time
series, which method should i use for causality test? is it possible to use ecm-ARDL results to determine causality between
variables?
Reply
Replies
My preference would be to use a VAR model and the MWALD (Toda-Yamamoto test). I have sevseral posts about
this that may help.
Reply
Najid Iqbal June 16, 2015 at 10:54 AM
Dear Prof,
How to check stability diagnostics in ARDL eviews9? I am talking about CUSUM and CUSUM SQUARE
Reply
Replies
One suggestion: save the residuals from the ARDL. Then regress these residuals just on a constant using OLS and
go from there.
Yasmine Rashed July 4, 2015 at 3:02 AM
Try this, from the estimated model window, choose View-->stability diagnostic--> recursive estimation
Anonymous September 8, 2015 at 6:22 AM
Dear Prof. Dave,

Does the stability test (Cusum&Cusum sqr) really matter in the ARDL? What if I don't include it in my analysis, just
like what you have explained in this blog? Thank you.
These tests have nothing to do with ARDL modelling and Bounds Testing, per se. With any estimated model you
may be concerned about the model's stability - hence the use of such tests.
Anonymous December 19, 2015 at 7:13 PM
Dear Prof. Dave, i tried the trick (One suggestion: save the residuals from the ARDL. Then regress these residuals
just on a constant using OLS and go from there.). When i regressed resid on c, i find c is insignificant and R_sqr is
zero. What to do?
Reply
Dear Prof,
I have used two softwares Eviews9 and Microfit4.1 for doing bounds test for my trivariate model but in some cases the
results were not the same. Which one is reliable? for my sample (1960-2012 yearly) how many lags should i define as max
lags number?
Reply
Replies
You should address the first question to the suppliers of those packages. With your annual sample, I'd try, maybe,
12 years as a maximum and use SIC to determine the preferred lag length. The latter will undoubtedly be much
smaller than 12.
Reply
9 min to Spreed
for ARDL cointegration test and having a sample of less than 50 observations (yearly data), which kind of Heteroskedastisity i
should use and how many lags i should determine for doing that test?
Reply
Replies
I doubt if het. is an issue with your time-series data, but you could White's test as it applies to a very general
class of types of het. Use SIC to determine the lag length.
Reply
Muhammad Ahad June 18, 2015 at 5:48 PM
Sir, you are doing great work. Can you tell me how i can run ARDL approach by using E-views 7.? because through estimation
it does not provide ARDL method in Method section. so how i can apply ARDL in E-views 7.
thank you. i really appreciate your efforts.
Reply
Replies
Dave Giles June 18, 2015 at 6:23 PM
See this post: http://davegiles.blogspot.ca/2013/06/ardl-models-part-ii-bounds-tests.html
All you need is OLS. There is also an EViews "add-in" for ARDL modeling that will run in EViews 7. See this post:
http://davegiles.blogspot.ca/2014/01/an-ardl-add-in-for-eviews.html
Reply
Dear Profesor
After running ARDL bounds tests, Ramsey rest test null hypothesis is not rejected. firstly i do not know how determine
number of fitted values for this test secondly by not rejection of this test what should i do?
Reply
Replies
The number of fitted values is somewhat ad hoc. You can't use just one - usually people use 2, 3, or 4.
The Ramsey test is testing if the coefficients of these extra variables are zero, You want them to be. That is, you
do not want to reject the null hypothesis. A rejection is signalling mis-specification of the model, either in terms
of functional form, or perhaps omitted regressors.
Also, please see http://davegiles.blogspot.ca/2015/06/readers-forum-page.html
Reply
Pascal Kamana June 26, 2015 at 9:29 AM
Dear Sir,
I was wondering if you could have an idea of how to find lag lengths using Gretl package.
Thanks!
Reply
Lag lengths for what, exactly?

Reply
Replies
Pascal Kamana June 29, 2015 at 12:51 AM
Dear Prof,
I was asking how to determine optimal p&q while using Gretl package and if possible how to do bounds test.
Thanks for your insights!
Pascal - try combinations of p and q and minimize SIC. To do the bounds test, all you need is access to OLS - see
my earlier post on this in this blog.
9 min to Spreed
Reply
Sidra June 27, 2015 at 4:20 AM
Sir your example uses two variables. I wanted to ask that can we replicate the same example using multiple variables. Plus
how can we find the causality taking the variables in pairs. . Also please letme know is it necessary to take the value in log
for the model? Thanks
Reply
Replies
Sidra - yes, you can do the same thing with three or more variables. The causality testing should be done
separately in the context of a VAR model. You don't have to take logarithms of the data.
Sidra July 1, 2015 at 5:43 AM
Sir can ARDL model be used of all the variables are I(1) and none is I(0) or I(2) ?
Dave Giles July 1, 2015 at 8:30 AM
Yes.
Sidra July 5, 2015 at 1:39 AM
I have replicated the above example with multiple variables. It is found to have a long run relationship ,but one
of my long run coefficients is showing the value 0 (although t statistic is significant) what does this mean and how
to interpret it .
The equation is
Cointeq = LOG(REAL_PER_CAPITA_INCOME) - (0.0008
*ELEC_PER_CAPITA + 0.0000*TOTAL_LABOUR_FORCE + 1.1345
*GFCF__OF_GDP + 9.6866 )
The dependent variable is taken in log and the others in level.
Many thanks
Looks to me like a scale issue. The value is zero to 4 decimal places, but it's not really zero. Try re-running
everything after dividing your TOTAL_LABOUR_FORCE series by (say) 10,000. All this will do is scale (multiply) the
estimated coefficient by 10,000. The you'll probably see an effect. No interpretations or other will be affected by
doing this, and the t-statistic will be identical to what it is now.
Reply
hello , i have dependant var I(0) , 6 independant var are I(1) , 1 independant var is I(0) and one I(2) ,, im confused between
VAR and ARDL model , which one is the appropriate?
Reply
Replies
VAR, using Toda-Yamamoto method - see my earlier posts. As I state in this post, you can't use ARDL if you have
I(2) data.
Also, see http://davegiles.blogspot.ca/2015/06/readers-forum-page.html
Reply
Anonymous June 29, 2015 at 12:23 PM
Dear Professor
According to one paper i found Long-run parameters and standard errors estimaed by ARDL method are biased specially in
small sample data. That paper suggested using bias-corrected bootstrap method instead of delta method. Now my question
is that how is it possible to do this in eviews 9.0?
Reply
Replies
Yes - but you'd have to write an EViews program to do it.
Reply
Anonymous July 5, 2015 at 8:52 PM
Are the bounds F- and t-tests for level relationships still valid in a conditional unrestricted ECM with a linear *and* quadratic
trend? And in a more general ARDL?
Reply
Replies
9 min to Spreed
The tables of critical values given by Pesaran et al. allow for various intercept-linear trend combinations, but
they won;t be valid of you have a quadratic trend in the model. If by a "more general ARDL" model you mean one
with more than two variables, then yes. The parameter, k, in the Pesaran et al. tables is for the number of "x"
variables in the model.
Reply
Dear Mr. Dave Giles
I have a question. How do I make the Granger causality test? because I have seen it in the papers mentioned always
performed test. Another question. Is it necessary to analyze the causality in the short and long term?
Thank you very much for your answer
Regards
Andres
Reply
Replies
Andres - see these posts:
http://davegiles.blogspot.ca/2011/04/testing-for-granger-causality.html
http://davegiles.blogspot.ca/2011/10/var-or-vecm-when-testing-for-granger.html
http://davegiles.blogspot.ca/2012/04/surplus-lag-granger-causality-testing.html
Reply
Anonymous July 15, 2015 at 1:34 AM
In the case of the model used ARDL

When the joint integration testing there I find no long-term relationship
Do not I continue to pause, or search for causal between variables
Reply
Replies
I'd do some causality testing. Here's why.

If there HAD BEEN cointegration, then there HAS to be Granger causality one way or the other. If there NO
COINTEGRATION, then there may or may not be G-causality. It's worth testing for it.
Reply
HELLO,
Thanks for the great post. However i have a question, is it okay to include a dummy variable to capture a break the data for
a long period of time say (20002Q1-2010Q4,if you have justification of an event that is likely to cause such break in the
series) 2) when using a VAR (from your ARDL 2 POST) to obtain the lag of the dependent variable, are we to specify the
dummy variable as an exogenous variable(in difference and in lagged level) as well? 3) what if i find no cointegration are
there any conventional model to test the short run effect as Granger causality test only tells the direction of causality?
lastly,(not related to this post) please do you have a post on stochatic simulation method of forecasting or any forecasting
related post?i l really look forward to your reply. Thanks very many.
Reply
Replies
That would be fine if you're really sure that there is just the one break. Keep in mind that the dummy variable is
simply shifting the intercept in the model, so this give you the answer to your second question - you would treat
the dummy variable in exactly the same way that treat the intercept. So, you would not be differencing/lagging
it. If there is no cointegration, then a simple ARDL model (not the sort used for bounds testing) would provide a
useful basis for examining short-run effects. For instance, see http://davegiles.blogspot.ca/2013/03/ardl-
models-part-i.html . Finally, I don't have any posts on stochastic simulation - why not leave me a request on the
"Readers' Forum" page and I'll see what I can do. If you use the "Search" on the blog page (right sidebar) you'll find
a handful of posts on forecasting.
Reply
hi dave,
asthis is the most recent post you get to reply, i have question concerning T-Y granger causality test in your previous post.
Does the AR graph really matter? because when i estimated a VAR(4) model selected by the information criteria, there was
no problem of Auto correlation but however the on AR graph,few of the points where outside the circle. when i estimated a
var(3) all the points where inside but there was a problem on auto correlation...please what do you think is wrong?
thanks...~valerie 9 min to Spreed
Reply
Reply
Replies
There are 2 quite different things going on here, One is testing for autocorrelation in the residuals of the model.
The other is checking to see if the estimated coefficients of the VAR model imply a dynamically stable
autoregressive structure. Unless the inverse roots of the characteristic equation associated with VAR lag structure
are all inside the unit circle, the model is dynamically unstable - a shock to the model will just grow and grow.
You wouldn't want to use a model with that feature.
Reply
thank you.two final questions please. are there any scenario where the specified lag length chosen by the information
criteria, does not still remove the problem of autocorrelation?if there is, are we allowed to increase the lag length
ourselves? secondly, if the lag length chosen is e.g 7 and which solves the AC problem in the residuals + the AR
condition,then estimating the var(7) in which case we include one extra lag (p+m, variables are all I(1)) when specifying the
exogenous do we still have to check the AC and AR graph of the new specified model? just wondering. thanks ~ Valerie
Reply
Replies
Valerie: Yes, this often happens, perhaps not surprisingly because the IC are looking at the "fit" of the model (with
a penalty for complexity), whereas autocorrelation may be arising because of incorrect functional form, etc. If
this occurs, you often need to increase the max. lag length that's suggested by the IC. That's OK. The main thing
is to be happy with the specification of the "base" model. It sounds as if you are referring to the TY procedure
where you then add lags of the variables (but don't include these extra lags in the null hypothesis) when testing
for Granger non-causality. Adding them is just a "trick" to ensure that the test statistic you're using has the usual
asymptotic distribution. That being so, you don;t have to be so concerned about the AC etc. in the "final" model
on which the testing is based.
Reply
Seyi August 25, 2015 at 6:38 AM
Dear Professor,
Is it not necessary to check that the underlying variables are not I(2) when structural breaks are present?
Reply
Replies
Dave Giles August 25, 2015 at 7:26 AM
The ARDL bounds testing requires that no variables be I(2), whether or not there are breaks.
Reply
ahmed Nusair August 26, 2015 at 12:03 PM
Dear Prof.
If I have, for example, five variables. The null hypothesis of no-cointegration would be H0: α1=α2=α3=α4=α5=0. What is the
correct form for the alternative hypothesis of cointegration? Is it
1) (α1≠α2≠α3≠α4≠α5≠0), or
2) At least one the α's is not zero, or
3) α1≠0, α2≠0, α3≠0, α4≠0, α5≠0, or
4) Some other form
Could you also please explain.
Thanks
Sal
Reply
Replies
Dave Giles August 26, 2015 at 12:16 PM
Sal - option (2), for reasons given in the original paper.
Reply
Dear professor before I estimate the ardl should I have to perform the causality test? if the answer is yes, then how should I
proceed if I have some variables that are I(1) and some I(0), because I know can estimate the ardl with different integrated
series, but I cannot perform the causality test. Thanks
Reply
Replies
9 min to Spreed
No, you don't.
Reply
Good Day
With respect to the direction of influence, I am not certain how this should be interpreted. Apart from referring to theory,
how should the signs be interpreted out of Eviews9.
My confusion stems from the fact that in Johanson Test result in eviews8 the signs in the cointegration equation were
swapped i.e. if they were -ve they were to be interpreted as +ve.
My Eviews9 ARDL results are below
Cointeq = GVT_BONDS – (-0.2733*GDP__ + 0.9637*CPI__ -1.7030

*CA_GDP__ + 0.3897*BD_GDP__ -0.1901*LEADING_INDICATOR
-0.0006*NET_BORROWING + 0.0001*NET_PURCHASES + 20.9160 )
Variable Coefficient Prob.

GDP__ -0.273306 0.2663
CPI__ 0.963655 0.0049
CA_GDP__ -1.702984 0.0042
BD_GDP__ 0.389691 0.2213
LEADING_INDICATOR -0.190125 0.0001
NET_BORROWING -0.000605 0.0027
NET_PURCHASES 0.000053 0.8282
C 20.915959 0.0000
Reply
Replies
I suggest you address this to the EViews forum.
Reply
Anonymous September 13, 2015 at 9:45 PM
Dear Prof.
Looking at your example of bivariate equation with the same break period, now, If one has a multivariate equation (e.g.
having five variables), and each variable has a different break date. Can we include all the break point in our estimation?
Reply
Replies
Dave Giles September 13, 2015 at 10:18 PM
Yes, you can.
Ibrahim M. A. September 18, 2015 at 2:17 AM
Thank you Prof. Another question on multivariate equation with different break period. I use test for structural
break purposely to further confirm that non of the variable is I(2), after that i did not include dummy for the
break period in the regression instead i use CUSUM and CUSUMSQ test to test the overall stability of the
parameters, and there are stable within the 5% significance level. Does this procedure appropriate?
That seems reasonable.
Ibrahim Mohammed Adamu September 18, 2015 at 11:57 PM
Thank you Prof.
Reply
‫ ﻋدوﻟﺔ دال‬September 14, 2015 at 9:35 AM
Thank you very much, Professor, I have a question: I want to measure the impact of the development of the banking sector
on economic growth using ARDL model , and I have six variables, you follow the same steps?
Reply
Replies

Yes, you do.
Reply
9 min to Spreed
Dear Prof. How is insert BREAK a the program EViews 9
Reply
Replies
Create a dummy variable.
Anonymous February 2, 2016 at 2:08 AM
if we have multiple break for different regressor, for example 1994, 1999, 2001, 2004 for 4 different regressor, is
it enough to create 1 dummy variable that include all the break?
Dave Giles February 2, 2016 at 9:53 AM
If you have 4 breaks for the same variable, then this implies 5 different "regimes" and you will need to construct 4
separate dummy variables.
Reply
Dear Prof. How should I "Breakpoint Unit Root Test" for six variables?, How is the expression within the form?, Did you see
that 35 of the observations adequate ?, variables are:
Real gross domestic product per capita variable dependent
Matrix variable banking development
Consumer prices inflation
Government spending ratio GDP
Ratio of capital accumulation to GDP
Trade openness variable
Waiting for your answer, thank you Professor
Reply
Replies
I don't wish to sound rude, but I just don't have time for this. Sorry!
Reply
Anonymous October 9, 2015 at 3:46 AM
Dear Sir, Thank you for your helpful post!

How can i get Eviews 9 demo? I’m a student and i have no organization, so i can’t fill the required fields…
How can i solve this problem?
Reply
Replies
Dave Giles October 9, 2015 at 8:27 AM
You will need to contact EViews directly - I don;t work for them! :-)
Reply
Unknown October 14, 2015 at 6:52 AM
Thank you for this wonderful explanation.

For beginners in ARDL models, like me, it is of great help.
Reply
Angeline Hirita Bata'anisia October 19, 2015 at 3:20 PM
hello Sir, Thank you for providing this valuable post!

I want to ask how to test for unit root for single structural break using Philips Perron Root Unit test as well as test for
multiple structural break in eviews 9? Does the noted Breakpoint test above already account for this or is there another
command I need to use in eviews?
Many thanks and appreciate the help,
Angeline
Reply
Replies
Dave Giles October 19, 2015 at 3:21 PM
Angeline - the breakpoint tests in EViews 9 give you all that you need.
Reply
9 min to Spreed
Tchirwa October 27, 2015 at 9:43 PM
Dear Professor Giles,
Just wanted to thank you for the blog on ARDL estimation which has helped me a lot. I wanted to ask you a question related
to ARDL. I am running three country-growth equations in Eviews 9 and I have 42 observations for each country (1970-2013).
However, I am concerned about the number of regressors (both fixed and dynamic) that are being generated from my ARDL
growth equations - at least 22 parameters (including both short and long-run coefficients). Can I still proceed with this
regression estimation and what would be the effect on degrees of freedom. Or in other words, what is the limit on the
number of regressors that I can include with a sample with 42 observations. The regressors that I have included are
investment, human capital, population growth, government consumption, real interest rate, real exchange rate, inflation
and fixed regressors (dummy variable for multiparty democracy, foreign aid, commodity price and foreign direct
investment). In total I have 11 regressors with a sample of 42 annual observations.
I look forward to hearing from you on this important matter Sir.
Reply
Replies
Obviously, you have enough degrees of freedom to fit the model. However, your degrees of freedom will be
limited and your inferences will not be very "sharp".
Tchirwa October 28, 2015 at 8:45 AM

So what should be my cutoff number of regressors to use with a sample of 42 annual observations?
As with any regression, there is no "cut off number".
Reply
Anonymous November 13, 2015 at 10:50 AM
Dear Prof.
Thank you for your elaborate post. It really helps us. I downloaded your linked Eviews Code but there is some error. It is not
opening. Kindly fix it. Thank you.
Reply
Dave Giles November 13, 2015 at 12:02 PM
Thanks _ I realise there is a problem. EViews issued a "patch" to the package so the old code won't run. I'll get to it as soon
as I have a chance.
Reply
Mustafa November 24, 2015 at 12:18 PM
Hi, dear Prof.

I have run ARDL model using eviews 9 and I have got the result. My question
Is how can I check for serial correlation and stability and R square? Thank you
Reply
Replies
Dave Giles November 24, 2015 at 1:06 PM
The R-square is reported in the output. As with any OLS regression, click on the "VIEW" tab and you can get
RESIDUAL DIAGNOSTICS, and STABILITY DIAGNOSTICS, as usual.
Reply
MUSTAFA November 25, 2015 at 5:39 AM
THANK YOU FOR REPLY, BUT MY DATA IS PANEL DATA, AND THERE IS NO STABILITY DIAGNOSTIC WHEN WE SELECT RESIDUAL
DIAGNOSTIC IN EVIEWS 9, WHAT SHOULD WE DO TO TEST STABILITY OR JUST IGNORE THE TEST? THANK YOU
Reply
Replies
Dave Giles November 25, 2015 at 9:21 AM
That's what the CUSUM information is for.
Reply
oz December 21, 2015 at 11:12 PM
Hi Professor,
My all variables are I(1), not mix of I(0)&I(1). Can I still use ARDL instead of ECM as I get better results using ARDL
model.Thank you.Oz
Reply
Replies
9 min to Spreed
Dave Giles December 21, 2015 at 11:24 PM
Oz - yes, you certainly can.
oz December 22, 2015 at 8:59 AM
Thank you so much for the prompt response.Best Regards
Reply
oz December 23, 2015 at 10:48 PM
Hi professor,
you said in the last part "Third, a 10% change in the price of crude oil will result in a long-run change of 7% in the price of
retail gasoline. "
is it 7% or 70% ?
Thanks
Reply
Replies
Dave Giles December 24, 2015 at 9:15 AM
No 7% is correct. A 1% change leads to a 0.7% change, or a 10% change leads to a 7% change.
Reply
TELLA OLUWATOBA IBRAHIM January 2, 2016 at 7:28 AM
Sir, can you tell the different correlogram q statistics and lm serial correlation test and which is more important as a test in
ARDL estimation.
Reply
Replies
See this post: http://davegiles.blogspot.ca/2015/05/alternative-tests-for-serial.html
Reply
Anonymous January 10, 2016 at 10:51 AM
Dear Professor,
Thank you for your fantastic blog.
In your example you use 2 variables but do we know why EViews reports k=1 (in the bounds testing output)? In the original
Pesaran et al. (2001) paper k stands for the number of regressors which in this case is k=2. Also EViews reports the k=1
critical bounds (p. 301 from Pesaran et al., 2001) while should report k=2. Thank you very much.
Reply
Replies
I suggest you check with the EViews forum at http://forums.eviews.com/viewforum.php?f=18
Reply
Anonymous January 16, 2016 at 7:28 AM
Dear professor, I really appreciate your very helpful blog on ARDL model. I am running ARDL for my master thesis. However, I
did not include the linear trend in the specification (I choose rest. constant), and the results are very reasonable. Today
after reading your blog, I tried selecting the linear trend and the results become not statically significant for most of the
variables. Can I exclude the trend ? Can you explain why there is a big difference when including and excluding the trend. Is
it necessarily include the trend all the time?? Thank you in advance for your support!
Reply
Replies
You don;t have to include the trend term - if it's insignificant, then by all means drop it.
many thanks professor for your prompt explanation! Your econometrics blog is amazing!!
Reply
9 min to Spreed
Thanks for the good info Prof. My questions, is it necessary to run a LM test for testing and detecting the multicolinearity
and heteroskedastcity test before we running the bound test and cointegrating and long run test? or its just enough by
looking the Q stats.
if there is no long run relationship based on bound test, then what next? are we going to stop there and then give up?
Thanks Prof.
Reply
Replies
There seems to be some confusion here. There is no LM test for multicollinearity. You could test for
homoskedasticity. The Q statistics tell you about the serial independence of the errors - nothing to do with
heteroskedasticity.
Reply
Thanks for the post. I have a question regarding the modeling. Ex what if I have 10 variables where some are strongly
correlated and I want to assess the long/short run relationship with a variable y. Is it possible to split the model into two
ardl? one for 5 variables and one for the other 5 and still obtain relevant results? I saw a similar question on stackexchange
(no answer) so I though I would ask you.
Reply
Replies
No, it's not, and the same applies for any regression model.
Reply
ylmz February 27, 2016 at 6:55 AM
Dear proof for reporting short term effects do we need vecm model or with eviews9 can we get it from directly ardl model
<?
Reply
Replies
You can ge this straight from the ARDL model.
Reply
ylmz February 29, 2016 at 6:34 AM
For ardl model can we use non stationary variables? after checked variables stationary levels and if there is no I(2). Which
one is better to take diferences and add to non stationary variables after make them stationary or add them to model non
stationary
Reply
Replies
Yes you can - that's the whole point of the ARDL modelling.
Reply
Anonymous March 6, 2016 at 2:07 AM
I wanted to thank you so much for the blog on ARDL estimation which has helped me a lot. I wanted to ask you a question
related to ARDL. I am running one country-growth in Eviews 9 and I have 25 observations (1990-2014). However, I have one
dependent variable and three independent variables. Can I still proceed with this regression estimation and what would be
the effect on degrees of freedom. Or in other words, what is the limit on the number of regressors that I can include with a
sample with 25 observations.
Reply
Replies
Dave Giles March 6, 2016 at 8:30 AM
Degrees of freedom are determined in the same way here as for ANY regression model. With that few
observations, it's unlikely that you'll be able to specify an appropriate lag structure.
Reply
9 min to Spreed
Dear Sir,
Thank you very much for your post! It really helps.Could you please explain or show me any papers to read through related
these problems?
1- why is heteroskeadasticity not a problem in ARDL model? Or if applicable, is there any ways to deal with this problem?
2- Some people said that when the absolute value of ECT (-1)is larger than 1, it is still acceptable in financial research. Is it
true?
I really appreciate your help!!!
Regards,
Reply
Replies
Dave Giles April 17, 2016 at 7:22 AM
1. It's not that het. isn't a problem - it's unlikely to be present with time-series data.
2.Nope, it's not true.
Reply
Dear Professor,
Is it feasible to use growth rates (f.e D(lngdp) or growth rate of exports)as our data to avoid problems related with the order
of integration? or maybe because of the difference-nature of some aspects of ARDL techniques our results would be from the
point of view of economics non-interpretable?
Socrates
Reply
Replies
Certainly, that's quite common.
Reply
Burcu Ozcan May 6, 2016 at 3:53 AM
Hi Giles, Thank you for your sound blog at first. I have one question to you. You constructed a dummy variable "break". It's
okay. But your break variable in the estimated ARDL model is not statistically significant since P-vaule is 0.0668 > 0.05. Do
you disregard/ignore this case? For example, I did similar ARDL model. And I obtained that P-value of Break is 0.3097. Should
I continue to use this model with Break? Or should I delete this dummy? Or does there exist a mistake in my case? Thank you
for your helps.
Reply
Replies
As I'm sure yo know, the thing about a p-value is that it's up to you how you interpret it. At what point is it so
small that you decide to reject the null hypothesis. My p-value was about 6%, so if I had a 5% significance level in
mind I would not reject, but I WOULD reject the null (of a zero coefficient value) at the 10% level. For this
reason, I retained the dummy variable. With a p-value as large as yours, I think that most people would not reject
the null. That is, they would remove the dummy variable.
Mr Ozcan maybe you are able to retain the dummy in the case that your ARDL model faces stability problems with
Cusum tests and the dummy variable ''fixes'' f.e the CUSUM of Squares diagnostic for 5% level. I am not sure if that
is legitimate although i have seen it before in papers. What do you think Dr Giles?
Reply

Hello! Many thanks for your blog, it is really cool and usefull. Is there a way to check the stationarity and cointegration for
abnormal series (large kurtosis)? Many thanks for your answer! Mr. Z.
Reply
Replies
You can use the ADF test or the KPSS test to test for the stationarity of the data even if the series is non-normal.
You should avoid the Johansen procedure for testing for cointegration in this case, but the Engle-Granger 2-step
procedure is still valid.
Reply

Hello! Many thanks for your blog! Could I use Johansen test with I(1) and I(0) process?
Thanks
Reply
9 min to Spreed
Replies

No - all of the series have to be I(1).
Reply
Fede May 19, 2016 at 9:23 AM
Dear professor,
Thank you very much for your post. I´m running an ARDL for my master thesis, where i have in total 6 variables. I have seen
many papers use every variable in turn as dependent variable when testing for cointegration Is that correct? In that case, is
it possible to change the specification (constant, constant + trend, none) depending on which variable you have as
dependent?
Thank you very much
Reply
Replies

If you're using an ARDL model, then you've already decided on a dependent variable. There's no reason to try
different choices of dependent variable. The literature you're referring to is the Engle-Granger 2-step method of
testing for cointegration, and applies only to the case where all of the variables are I(1). In that case, you can
choose different variables as the LHS variable in the cointegrating regression, The choice you make can affect the
outcome of the test. Usually you would always include an intercept, and if you use a trend variable, you'd use it
in every case. If the results depend on the way the regression is normalized, which result do you choose? There's
some old evidence (Dolado wet al. as I recall) that suggests that you should choose the normalization (choose the
dependent variable in the first-stage cointegrating regression) that maximizes the R-squared. (One of the few
situations where maximizing R-squared has any justification!)
londonbloke May 31, 2016 at 3:21 PM
Dear Dave, Fede is quite right in saying that many papers use ARDL approach by normalising on each variable in
turn. I guess, one should normalise on a variable if the right hand side variables are the forcing variables.
Especially literature in energy economics i.e. role of energy in growth is awash with such papers.
Reply
vijay modi June 15, 2016 at 11:50 PM
dear professor,
thank you very much for your post i am working with panel data in eviews 9 as i have done with the ardl but please help me
whether it is possible to test the ardl bound test for panel data in eviews
Reply
Replies

There's no "canned" routine for this in EViews so you'll have to write some code. Also, check the EViews forum at
eviews.com
Bích Ly Lê June 18, 2016 at 8:10 AM
Dear Sir,
I run the ARDL model and face the "singular matrix" error. How can i solve this?

It's just like any other regression model. You're trying to use too many lags relative to the sample size.
Reply

Thank you for your fantastic posts !
I have a question regarding the “cointegrating form” of the model. If the coefficient of CointEq(-1) is negative but lower
than -1, would the ECM between the two variables of interest still be validated ? Would it mean that there is no “stable”
long-run relationships between the two variables?
According to the Engle & Granger and the Johansen methodologies, this coefficient must be negative but higher than -1
Thank you so much for your reply
Kind regards
Reply
Replies

That's right - if it's more negative than -1 then the adjustement process is "over-correcting".
9 min to Spreed
I have benefited greatly form your blogs. THANK YOU! My question is related to the question above - if my model
is great in every aspect (significant and correct signs) but the coefficient of CointEq(-1) is -1.56 (which is over-
correcting), what do you think may be happening? What do you mean by "over correcting" and what may be
causing it? Can I use that model still or would it be inappropriate to keep that model?
I look forward to your response.

You should not use the model. Almost certainly the maximum lag lengths have been mis-specified.
Reply
Ana Ospina August 22, 2016 at 1:52 AM
Dear Professor,
Thank you for your help in understanding this model, there are not that much information about how to proceed and
understand what the results means and what to select.
I just have one question: if you see that the variable LOG_CRUDE has a unit root, why you do the ARDL model without the 1st
difference of that serie but with the non-stationary serie? for this model is not requeriment for the series to be stationary? if
not, what about spurious correlations?
Thank you so much for your help.
Regards.
Reply
Replies
Dave Giles August 22, 2016 at 4:47 AM
That's the whole point about the ARDL bounds testing. You can use a mixture of I(0) and I(1) variables - the
"bounds" are for "all I(0)" and "all I(1)" extreme situations.
Reply
Shagufta Shabbar September 20, 2016 at 2:44 AM
Thank you for your fantastic posts ! I don't want to use any lag of the dependent variable in my regression (its capturing most
of the variations in the model). Is that possible?
Thanks
Reply
Replies
No, it's not - that will totally invalidate the ARDL/bounds testing procedure.
Reply

Dear Dave,
are you going to go over the non-linear ARDL? I think this is an important topic that needs your great feedback and great
explanation.
Reply
chenny November 3, 2016 at 12:46 AM

thanks Prof, my name is chenny from Indonesia...your ardl tutorialis very clear..its very helpfull...thanks
Reply
udari niranjala November 15, 2016 at 11:17 PM
Dear Professor,
Thank you very much for the excellent blog post. This is very useful. I'm testing ARDL for the first time. I got the results for
the bounds test and long run coefficients. However I have a question on ECM. According to you error correction coefficient is
Coint(-1) taken from the long run form. How can I interpret it?
Reply
Replies
As in any error-correction model, it tells you the speed of adjustment from a short-run out-of-equilibrium position
to the long-run equilibrium
Reply
9 min to Spreed
Dene Hurley November 17, 2016 at 7:34 PM

Your posts have been tremendous help! I found serial correlation and am not sure how to resolve them before going on to
Bounds test. Any suggestion, please? Thanks.
Reply
Replies
Dene - you should be able to resolve this by adding one or more ADDITIONAL lags of the dependent variable you're
using in the ARDL model, beyond the max. number suggested by SIC or AIC.
Reply
Unknown November 26, 2016 at 2:16 AM
Respected Sir!If I am facing serial correlation in residual of regression output. What should I do pls?
Muhammad Ajmai
Reply
Replies
You should be able to resolve this by increasing the maximum lag length for the dependent variable.
Reply
Anonymous December 2, 2016 at 6:28 AM

Dear Professor, Is there a "Breakpoint Unit Root Test" for panel data? In Eviews or else?
Reply
Replies

This comment has been removed by the author.

In Stat you can apply the zandrews or clem commands to individual time-series within a panel. e.g., see
http://ageconsearch.umn.edu/bitstream/117499/2/sjart_st0080.pdf
Reply
Unknown December 5, 2016 at 10:33 PM

HEllo Sir,
How do you choose your dependent variable if there are more than two variables in the ARDL model?
Reply
Replies

Well, an ARDL model is like any other regression model. You're trying to "explain" one of the variables. In my case
here it's obvious that I want to see if gasoline prices respond to changes in crude oil prices, so the former is the
dependent variable. I wouldn't reasonably expect things to be reversed! Similarly, if I were working with
consumption and income, consumption would be the dependent (LHS) variable in the model.
Reply
Faisal Sher January 21, 2017 at 12:12 PM
This comment has been removed by the author.

Reply
Replies
Dave Giles January 21, 2017 at 12:34 PM
Faisal no, you can't do this with an ARDL model. You need to use a VAR model with your I(1) variable first-
differences, and the other variables in levels. (You can also difference the I(0) variables if you wish.)
Faisal Sher January 21, 2017 at 11:08 PM

Thank you very much Dear Professor!
Reply
9 min to Spreed
Hi Dave – You’re doing awesome work

Question:
I ran the cointegrating and Long run model and obtained an error-correction coefficient of -0.5614 which was negative and
significant.
The long run coefficients were not significant. What is the meaning/interpretation of this?
Does it mean that the two series just move together, but one cannot explain the other?
Reply
Replies

Thanks. Yes, I think that's how I'd interpret that result.

Thanks - that was quick :)
Reply
Plots near super corridor Indore February 28, 2017 at 5:45 AM
I really liked the way you had posted your blog. Keep sharing more with us.
Reply

sir Is FMOLS applicable for time-series data: all are I(1)
Reply
Replies
Dave Giles April 10, 2017 at 11:31 AM
Yes, that's what it's designed for, as long as you believe that there is only one cointegrating vector. Otherwise
Johansen's methodology should be used.
Reply
Dear Professor,
Should I apply tests lik serial correlation (Breusch–Godfrey) and heteroskedasticity(ARCH) even after using the HAC(Newey-
West) option in Eviews 9?
Thank you
Reply
Replies
Yes - especially tests for serial correlation. The presence of the latter could signal a mis-specification of the lag
length(s). And the bounds test critical values are only valid if the errors are independent,.
Reply

Dear Professor,
mentioned below a table from a published article. Is it mandatory for ARDL model to have only ONE co-integration? such
tables are reported in research article.
Dependent variable AIC lags F-statistic Decision
FF (F\Y, K, L, T) 2 6.701 Cointegration

FY (Y\L, K, F, T) 2 2.365 No cointegration
FL (L\Y, K, F, T) 1 0.762 No cointegration
FT (T\Y, K, F, L) 1 2.736 No cointegration
FK (K\Y, L, F, T) 1 2.552 No cointegration
Lower-bound critical value at 1% 3.06
Upper-bound critical value at 1% 4.15
Lower and Upper-bound critical values are taken from Pesaran et al. (2001), Table CI(ii) Case II.
Thank you
Reply
Replies
Take a look at this EViews blog post...... http://blog.eviews.com/2017/05/autoregressive-distributed-lag-

ardl_8.html 9 min to Spreed
Reply
Unknown June 9, 2017 at 12:36 PM

Would you please tell me that to Run ARDL, it is necessary that dependent variable is I(1), or it can be I(0) or I(2)? Thanks
Reply
Enter your comment...
Comment as: venkatesh hari (Google) Sign out
Publish Preview Notify me
Load more...
Links to this post

Create a Link
Newer Post Home Older Post
Subscribe to: Post Comments (Atom)
Simple theme. Powered by Blogger.
9 min to Spreed

Econometrics Beat - Dave Giles' Blog - ARDL Modelling in EViews 9

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Econometrics Beat - Dave Giles' Blog - ARDL Modelling in EViews 9

Загружено:

Авторское право:

Доступные форматы

8/23/2017 Econometrics Beat: Dave Giles' Blog: ARDL Modelling in EViews 9

More Next Blog» venkateshhari8@gmail.com Dashboard Sign Out

Econometrics Beat: Dave Giles' Blog

Home Data Code Readers' Forum Former Students Jobs

ARDL Modelling in EViews 9 About Me

Email address... Submit

Specification Testing With

I received the following email query

The result is:

Amazon: Author Central

Google Scholar h-index

Popular Posts (Last 30 Days)

ARDL Models - Part

An Overly Confident (Future)

Testing for Granger Causality

ARDL Models - Part I

2SLS 3SLS American Statistical

StatsBlogs 9 min to Spreed

Statistical Modeling, Causal

Roger Farmer's Economic

The Enlightened Economist

God plays dice

The Grumpy Economist

Dead For Tax Reasons

Allan W. Gregory's Blog

Causal Analysis in Theory and

Carol's Art Space

Econ Academics Blog

CPI +1.7 % Chg. from Yr.

Civ. Unemploy. Rate 4.3

10-Yr. Treas. Rate 2.18

Real GDP +2.6 %, Comp.

So, what do we conclude from all of this?

© 2015, David E. Giles

Posted by Dave Giles at 12:40 PM

Anonymous January 9, 2015 at 2:41 PM

JAWAD KAZMI January 13, 2015 at 12:51 AM

Dave Giles January 13, 2015 at 9:32 AM

If X is cointegrated with Y, then Y MUST be cointegrated with X.

Anonymous January 18, 2015 at 9:11 PM

Thank you very much again!

Dave Giles January 19, 2015 at 8:25 AM

Anonymous September 15, 2015 at 11:13 PM

Dave Giles September 16, 2015 at 7:58 AM

Anonymous May 2, 2016 at 12:52 PM

Dave Giles May 2, 2016 at 1:15 PM

Select coefficient tests, Wald test.

Anonymous February 17, 2015 at 12:39 PM

Another excellent post! Thanks for all the information.

Dave Giles February 17, 2015 at 12:44 PM

Oyeleye Olalekan February 19, 2015 at 1:07 AM

resbaby July 13, 2015 at 4:07 AM

that was also my question

Anonymous March 12, 2015 at 11:56 AM

Dave Giles March 12, 2015 at 1:12 PM

ham you August 17, 2015 at 4:05 AM

Critical values for ARDL bounds Tests (Narayan, 2004):

Anonymous April 16, 2015 at 8:11 AM

Hiển Bùi Quang April 18, 2015 at 8:05 PM

Dave Giles April 18, 2015 at 8:21 PM

You'll have to contact EViews - I don't work for them!

Hiển Bùi Quang May 7, 2015 at 9:16 AM

Dave Giles May 7, 2015 at 10:25 AM