explained in the methodology, TDYL procedure is handy to test for Granger non-

causality in such circumstances.

Table 4-3. Stationary Tests (Unit Root) in Log Second Differences

Total
Test Stochastic Trends in Log Second Differences
Series
0.10* % 0.05* % 0.01* %
ERS^ 13 11 84.62 12 92.31 12 92.31
KPSS† 8 0 0.00 0 0.00 0 0.00
Ng and Perron -DFGLS 24 20 83.33 20 83.33 20 83.33
Ng and Perron -MPT 31 26 83.87 26 83.87 26 83.87
Ng and Perron -MSB 31 26 83.87 26 83.87 26 83.87
Ng and Perron -MZ 31 26 83.87 26 83.87 26 83.87
Ng and Perron -MZalpha 31 26 83.87 26 83.87 26 83.87
Ng and Perron -PT 30 26 86.67 26 86.67 26 86.67
Total 199 161 80.90 162 81.41 162 81.41
^ Elliott-Rothenberg-Stock, †Kwiatkowski-Phillips-Schmidt-Shin, *Significance level (α).

4.1.2 TYDL VAR(p) Lag Length

The first step in the TDYL procedure is to determine the maximum order of

integration in the system of equations (dmax). Pretesting together with an

organization of the specific variables that enter into model estimation helps to

accomplish this task in a very didactic way. To illustrate, every row in Table 4-4 and

Table 4-5 depicts a model which change according to country, total or agricultural

exports, series type nominal or real, unconditional volatility measure standard

deviation or coefficient of variation, and own country currency exchange rate

volatility or third country currency exchange rate volatility. Every column represents

a variable along with its process type in the following column. Curiously enough,

dmax is of order three for all 84 models.

The second step is to determine the lag-length of the system. The selection of

the optimal lag length involved the estimation of VAR(k) models with long AR lags

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