Estimation of ARDL model: Old school

We show the estimation process for Co2 as dependent variable and EC

and GDP as regressors. We take logarithm of these variables for
estimation purpose

Consider the optimum lag length of 1, the model 1 reduces to

We estimate this model with OLS using the following command

d(lnco2) c d(lnco2(-1)) d(lnec(-1)) d(lngdp(-1)) lnco2(-1) lnec(-1) lngdp(-

1)
Actually we estimate models where p is maximum lag length
selected and k is number of regressors. Here we have taken p=1 and
therefore we estimate 4 models. Other models to be estimated would be:
(1,1,0),(1,0,1) and (1,0,0). We select a model out of these four models
based on either AIC or SBC.

Let we select (1,1,1), we will apply wald test as follows to see the
cointegrtaion.

For computing the F-statistic, we apply Wald test on the coefficient of

lnco2(-1),lnec(-1) and lngdp(-1) in eviews language

For wald test, we go to view coefficient diagnostic wald test

Compare these with the critical value provided by Narayan(2005)

The critical value bounds for the ARDL bounds test are (5.920, 7.197),
(4.083, 5.207), and (3.330, 4.347) for 1%, 5%, and 1o% respectively.

Since F-statistic is greater than upper bound value of 5.207 at 5% level of

significance, we conclude that there exists a long-run relationship
between CO2, EC and GDP.

Obtaining long run coefficients (i.e., elasticities) from the

selected ARDL (p,q1,q2) model

Let the cointegration exists, the next step is always to apply ARDL model
specification using the OLS.

We estimate the long run coefficients (i.e., elasticities) using the

following relationship

Let we consider a model

,
Step 1: Suppose we choose lag length of all variables equal to 1, we
estimate different model specifications and select Model 5