uroot |

Carries out unit root tests on a pool series.

When used with a pool series, the procedure will perform panel unit root testing. The panel unit root tests include Levin, Lin and Chu (LLC), Breitung, Im, Pesaran, and Shin (IPS), Fisher - ADF, Fisher - PP, and Hadri tests on levels, or first or second differences.

Note that simulation evidence suggests that in various settings (for example, small), Hadri's panel unit root test experiences significant size distortion in the presence of autocorrelation when there is no unit root. In particular, the Hadri test appears to over-reject the null of stationarity, and may yield results that directly contradict those obtained using alternative test statistics (see Hlouskova and Wagner (2006) for discussion and details).

Syntax

pool_name.uroot(options) pool_series

Enter the pool object name followed by a period, the keyword, and the name of a pool “?” series.

Options

Basic Specification Options

You should specify the exogenous variables and order of dependent variable differencing in the test equation using the following options:

exog=arg (default=“const”) | Specification of exogenous trend variables in the test equation: “const” “trend” (include a constant and a linear time trend). |

dif=integer (default=0) | Order of differencing of the series prior to running the test. Valid values are {0, 1, 2}. |

You may use one of the following keywords to specify the test:

sum (default) | Summary of the first five panel unit root tests (where applicable). |

llc | Levin, Lin, and Chu. |

breit | Breitung. |

ips | Im, Pesaran, and Shin. |

adf | Fisher - ADF. |

pp | Fisher - PP. |

hadri | Hadri. |

Sample Option

balance | Use balanced (across cross-sections or series) data when performing test. |

Lag Difference Options

Specifies the number of lag difference terms to be included in the test equation. Applicable in “Summary”, LLC, Breitung, IPS, and Fisher-ADF tests. The default setting depends on whether you choose to balance the samples across cross-sections.

If you do not include the “balance” option, the default is to perform automatic lag selection using the Schwarz criteria (“lagmethod=sic”).

Alternately, if you include the “balance” option, the default setting is a common, observation-based fixed lag (“lag=default”) where:

(1.3) |

lagmethod=arg (default=“sic”) | Method for selecting lag lengths (number of first difference terms) to be included in the Dickey-Fuller test regressions: “aic” (Akaike), “sic” (Schwarz), “hqc” (Hannan-Quinn), “tstat” (Ng-Perron first backward significant t-statistic). |

lag=arg | Specified lag length (number of first difference terms) to be included in the regression: integer (user-specified common lag length), vector_name (user-specific individual lag length, one row per cross-section). |

maxlag=arg | Maximum lag length to consider when performing automatic lag length selection: integer (common maximum lag length), or vector_name (individual maximum lag length, one row per cross-section). The default setting produces individual maximum lags of, default= where is the length of the cross-section. |

lagpval=arg (default=0.1) | Probability value for use in the t-statistic automatic lag selection method (when “lagmethod = tstat”). |

Kernel Options

Specifies options for computing kernel estimates of the zero-frequency spectrum (long-run covariance). Applicable to “Summary”, LLC, Fisher-PP, and Hadri tests.

hac=arg (default=“bt”) | Method of estimating the frequency zero spectrum: “bt” (Bartlett kernel), “pr” (Parzen kernel), “qs” (Quadratic Spectral kernel), |

band = arg, b=arg (default=“nw”) | Method of selecting the bandwidth: “nw” (Newey-West automatic variable bandwidth selection), “a” (Andrews automatic selection), number (user-specified common bandwidth), vector_name (user-specified individual bandwidths, one row for each cross-section). |

Other options

prompt | Force the dialog to appear from within a program. |

p | Print output from the test. |

Examples

Pool1.uroot(llc,exog=trend) gdp?

performs the LLC panel unit root test with exogenous individual trends and individual effects on pool series GDP?

Pool1.uroot(ips,exog=const,maxlag=4,lagmethod=aic) inv?

performs the IPS panel unit root test on pool series INV?. The test includes individual effects, lag will be chosen by AIC from maximum lag of three.

Pool1.uroot(sum,exog=const,lag=3,hac=pr,b=2.3) mm?

performs a summary of the panel unit root tests on the pool series MM?. The test equation includes a constant term and three lagged first-difference terms. The frequency zero spectrum is estimated using kernel methods (with a Parzen kernel), and a bandwidth of 2.3.

Cross-references

See also Pool::coint.