<p>I have to make a regression with real exports as the dependent and then an aggregated GDP income variable and the real effective exchange rate as independent variables. My variables are time series (quarterly data).</p>
<p>What should I do before doing an OLS regression and then going for a Johansen cointegration method? Which should I do for structural breaks?</p>

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2024-02-21T16:51:58.123Z
Hi: he first thing you should try to do is figure out which variables are I(0) and which are I(1). That will determine what you do next because one thing you definitely need is balance on both sides of any time series relation.  Hopefully they all have the same order. I wouldn't worry about structural bteaks at this stage.
mark leeds
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2024-03-02T17:55:49.730Z
Thank you for your response!!! I did rather tests and found that they all have a unit root in or else and are stationary in first differences. I want to do a Johansens coimtegration but I don't know what is the difference between exogenous and endogenous variables and what happens if I put a variable in the exogenous part. I am working on Gretl .
ORESTIS TZIAMALIS
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2024-03-03T19:34:44.797Z
Hi:  endogeneity means that the variable is part of the system and needs to be estimated along with the other variables. exogeneity, OTOH, means that the value of the variable is determined outside the system and use as a predictor in the system but does not need to be estimated.  I would assume that all variables are endogenous. Instead of jumping in and using Johansen machinery,  assuming they are all I(1) ( this should be tested also )  I would regress each of the independent variables on the response and then check the residuals to see if they are stationary. That would be a first step.
mark leeds
<econometrics><time-series><co-integration>
What should I do before an OLS regression and Johansen cointegration test with time series data?
ORESTIS TZIAMALIS
# What should I do before an OLS regression and Johansen cointegration test with time series data?

(Asked by: username_0 on 2024-02-21)

I have to make a regression with real exports as the dependent and then an aggregated GDP income variable and the real effective exchange rate as independent variables. My variables are time series (quarterly data).

What should I do before doing an OLS regression and then going for a Johansen cointegration method? Which should I do for structural breaks?

**Tags:** econometrics, time-series, co-integration

> **Comments:**
> **username_1**: Hi: he first thing you should try to do is figure out which variables are I(0) and which are I(1). That will determine what you do next because one thing you definitely need is balance on both sides of any time series relation.  Hopefully they all have the same order. I wouldn't worry about structural bteaks at this stage.  
> **username_0**: Thank you for your response!!! I did rather tests and found that they all have a unit root in or else and are stationary in first differences. I want to do a Johansens coimtegration but I don't know what is the difference between exogenous and endogenous variables and what happens if I put a variable in the exogenous part. I am working on Gretl .  
> **username_1**: Hi:  endogeneity means that the variable is part of the system and needs to be estimated along with the other variables. exogeneity, OTOH, means that the value of the variable is determined outside the system and use as a predictor in the system but does not need to be estimated.  I would assume that all variables are endogenous. Instead of jumping in and using Johansen machinery,  assuming they are all I(1) ( this should be tested also )  I would regress each of the independent variables on the response and then check the residuals to see if they are stationary. That would be a first step.  

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## 0 answers

