ips#

Purpose#

Panel series unit root testing. This test uses the sample mean of the t-statistics across all individual series within a panel of time series variables.

Format#

{ zstat, pcrit } = ips(y, trend, demean, lags[, printOut])#

Parameters:

y (TxM matrix) – panel data.
trend (scalar) – Indicator variable for including trend. 0 = no trend, 1 = trend.
demean (scalar) – Indicator variable for demeaning variable. 0 = no demeaning, 1 = demean data.
lags (scalar) – Number of lags to include in the test.
printOut (scalar) – Optional argument, indicator variable for printing results. 0 = no printing, 1 = print.

Returns:

zstat (scalar) – IPS test statistic.
pcrit (vector) – Critical values for unit root test at the 1%, 2.5%, 5%, and 10% significance level.

Example#

new;
cls;
library tsmt;

// First load data
data = loadd( getGAUSSHome("pkgs/tsmt/examples/panel_g.csv"));

// Take log of data
log_yt = data[., 1]~log(data[., 2:9]);

// Input the lags used in Enders, Table 4.8
lags = { 5, 6, 3, 1, 3, 1, 1, 3 };

// No demeaning
demean = 0;

// Include trend
trend = 1;

//  Run IPS test without a trend and without demeaning
print "The IPS test statistic using unmeaned data:";
{ z_1, p_crit1 } = ips(log_yt, trend, demean, lags);

The results are printed to screen:

Test:                                                    IPS
Test Variable:                                             Y
Timespan:                                     1980Q1:2008Q1
Ho:                                          Panel unit root
Model:                                    Constant and Trend
N. Obs:                                                  113
N. Groups:                                                 8
Panel Type:                                         Balanced
============================================================

Avg. T-stat                                           -2.414
Adj. Z-stat                                           -2.921

Critical Values:
                            1%             5%            10%
                        -2.719         -2.611         -2.513
============================================================

Reject the null hypothesis of unit root at the 1% level.

Individual t-stats:
============================================================
Group                             T-stat

1                                 -2.068
2                                 -2.035
3                                 -2.938
4                                 -3.064
5                                 -1.752
6                                 -1.945
7                                 -2.939
8                                 -2.567

Library#

tsmt

Source#

ips.src