• Bartlett small-sample correction of the tests for the cointegrating rank and hypotheses on Beta.
• A new “CATSmining” automated model-selection procedure.
• Estimation and hypothesis testing of the I(2) model, including testing hypotheses on the multi-cointegrating relations and the I(1) relations among the system variables
• Estimation of structural moving average models.
• System reduction tests for lag length determination.
• Missing observations in data allowed.
• Updated recursive estimation routine includes new tests for eigenvalue fluctuation, constancy of the cointegrating space and the log-likelihood function.
• Allows for backwards recursion for investigating parameter constancy over the beginning of the sample.
• For most model specifications, CATS now reports the correct critical values and p-values for the rank test. For other models, you can simulate the critical values using a built-in procedure.
• Includes a procedure for estimation and identification of structural moving average models.

OTHER FEATURES

These features carry over from Version 1.0:

• “Batch” tests for long-run exclusion, weak exogeneity, and stationarity on all model variables (now available from the cats menu). Also includes a test for unit vectors in alpha, which corresponds to testing if the cumulated disturbances of any of the variables do not enter the common trends.
• Support for partial systems, models with structural breaks, and various forms of dummy variables.
• Multivariate and univariate tests of the estimated residuals.
• Recursive estimation for assessing constancy of the estimated model parameters, including tests for constancy of the estimated eigenvalues, the cointegrating space, the log-likelihood function, the parameters of an identified system, and the adequacy of one-step-ahead predictions.
• Options for testing hypothesis on the long-run relations in Beta as well as on the adjustment coefficients in Alpha.
• Choice of normalization for each cointegrating vector (CATS 2 simplifies this by suggesting default choices).
• Estimation of the parameters of the moving average model, e.g. the long-run impact matrix C and the loadings to the common trends (with asymptotic t-values).
• A large variety of preset graphics illustrating various key aspects of the estimated model.

• All-new user interface, with separate menus for various categories of operations, including I(1) analysis, I(2) analysis, graphics, and automated tests.
• All model settings, including the deterministic terms and lag structure, are menu-controlled, so you can now change the underlying VAR model without quitting and re-starting CATS.
• All procedure settings, such as maximum number of iterations and convergence criteria for the switching algorithms, screen output format, and more, can be set via a “Preferences” dialog box.
• The estimated model can now be exported as a RATS “MODEL” making it much easier to compute forecasts and impulse responses.
• The graphs created by CATS can be customized.
• Output can be exported in tex or csv formats.
• Restrictions can be saved and re-loaded, making it easier to replicate analyses or continue your work at a later time.
• CATS offers the option of running in a true batch mode that does not require user interaction to generate basic output. This allows it to be used in loop.

To give you a better idea of what you’ll find in Version 2, we’ll walk through the various menus, starting with the first menu, entitled CATS, which is shown below:

Most of the features on this menu are new in Version 2.0, and allow you to make adjustments without having to quit and restart the CATS procedure. They also give the user more control over many aspects of the program than in Version 1.

For example, you can change the model (including the deterministic variable structure, the inclusion of seasonal dummies, and the lag structure), control the sample range (by setting starting and ending dates, using a sample “dummy” series, or directly excluding specific observations), display a summary of the model, or set any of the following preferences:

HERE IS THE I(1) MENU

Most of these options will be familiar to those of you who have used CATS 1.0. These form the core functionality of the I(1) analysis capabilities in CATS 2.0, which includes determining and setting the cointegration rank and testing hypotheses on the structure of the elements of the Pi matrix.

Here is the I(2) menu

I(2) analysis is a new feature in CATS 2.0. The menu operations allow you to set the ranks of the model, test restrictions on both the Tau and Beta matrices, and more.

As you can see, the Graphics menu provides quick access to a wide selection of graphs. In addition to offering more graphs than were available in CATS 1.0, Version 2 also allows the user to customize the appearance of the graphs. The “Customized Graphics” operation toggles between the default settings, and your customized settings, which you access via the “Settings” operation:

THE AUTOMATED TESTS MENU

As the name implies, the Automated Tests menu provides access to several important tests, most of which CATS can perform with little or no input required from the user. Here’s the menu:

Most of these are fairly self-explanatory. One major new feature is the CATSmining operation. The name is a twist on the phrase “data mining”, implying an automated routine for analyzing data. In this case, the CATSmining routine can automatically identify and restrict the cointegrating space, given a user-specified cointegrating rank. You also have the option of supplying user-defined relations to be used in addition to those selected by the automatic procedure. The Settings operation gives you control of many aspects of the CATSmining process.

Finally, the Load Model operation allows you to load into memory a CATS model saved in a previous session (the ability to save and reload models is new in Version 2).

THE MISC MENU

The Misc menu (short for miscellaneous) provides ten more useful features:

The first two display the short run and MA representations for the current model.

The next item, Structural MA Model, is a major new addition that allows you to define a structural model and plot the resulting impulse response functions.

Other operations allow you to save the generated data to various types of file (or display the data in a spreadsheet-style window), save the model for use in a later session, and more.

You may use the software on any compatible computer, provided you use it on only one computer at a time. For instance, you can install it on both a home computer and an office computer. Or you may use the software on a network or file server provided that access is limited to one user at a time.

Limited Warranties.

1. Estima does not warrant that the program will meet your requirements, or that operation of the program will be uninterrupted or error-free. Estima, however, warrants the media on which the program is furnished to be free from defects in materials and workmanship under normal use for a period of ninety(90) days from the date of delivery to you, as evidenced by a copy of your receipt. Your exclusive remedy for breach of this warranty shall be the replacement (without charge to you) of a disk not meeting Estima’s warranty.

2. Estima makes no other warranties, either express or implied, and Estima shall not be liable for implied warranties of merchantability and fitness for a particular purpose, nor for the special, incidental, or consequential damages such as loss or profits or inability to use the software.

The remedy for breach of this warranty shall be limited to replacement of the media.

Governing Law.

This license is governed by the laws of the State of Illinois and the United States of America.

MULTIPLE-USER/NETWORK LICENSE AGREEMENT

Multiple User/Network License. This is a multiple user/network license. You (the Licensee) may (a) install this on the number of computers indicated by the User Limit, solely for use by your employees (and your students if you are an institution of higher learning), or (b) install this on a single local area network provided the number of simultaneous users is limited to the User Limit. If the User Limit is “Unlimited”, you may do both. As this is a perpetual license, you are responsible for seeing that the software is removed from computers installed under option (a) when the computer no longer is in the possession of an employee or student. Should there be users (such as students) for whom enforcement of this would be difficult, you can obtain install disks for the software from Estima that are time-limited. Copies of the program installed with these would still count against your User Limit, but only for the time during which the program would be activated.

Limited Warranties:

1. Estima does not warrant that the program will meet your requirements, or that operation of the program will be uninterrupted or error-free. Estima, however, warrants the media on which the program is furnished to be free from defects in materials and workmanship under normal use for a period of ninety(90) days from the date of delivery to you, as evidenced by a copy of your receipt. Your exclusive remedy for breach of this warranty shall be the replacement (without charge to you) of a disk not meeting Estima’s warranty.

2. Estima makes no other warranties, either express or implied, and Estima shall not be liable for implied warranties of merchantability and fitness for a particular purpose, nor for the special, incidental, or consequential damages such as loss or profits or inability to use the software.

The remedy for breach of this warranty shall be limited to replacement of the media.

Governing Law.

This license is governed by the laws of the State of Illinois and the United States of America.