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st: Panel unit root test


From   "Tong, Tingting" <ttong2@utk.edu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: Panel unit root test
Date   Mon, 21 Nov 2011 14:23:38 +0000

Dear All, 

I am very new in Stata and I am going to use PMG method in my thesis.

I have a question about panel unit root test. My data has 44 panels from 1958 to 2005. 

For the panel unitroot test, i use "help xtunitroot" in stata and it gives me some describtions. I used IPS and had the result like followings:

. xtunitroot ips lnvadd, lag(aic 8) trend

Im-Pesaran-Shin unit-root test for lnvadd
-----------------------------------------
Ho: All panels contain unit roots           Number of panels  =     44
Ha: Some panels are stationary            Number of periods =     48
AR parameter: Panel-specific                Asymptotics: T,N -> Infinity
Panel means:  Included                                        sequentially
Time trend:   Included
ADF regressions: 1.14 lags average (chosen by AIC)
------------------------------------------------------------------------------
                    Statistic      p-value
------------------------------------------------------------------------------
 W-t-bar              4.6401        1.0000
------------------------------------------------------------------------------
I think this means lnvadd has unitroot since p-value is very big.

Then I want to see if i take the first difference of lnvadd, does it still have unit root or become stationary.

I used generate code and it reported that 44 missing values. I am not sure if this the the right way to get the first difference data in Stata.

generate lnvaddd1=d1.lnvadd
(44 missing values generated)

Then I run the unitroot test again for the d1.lnvadd variable i just generated.
. xtunitroot ips  lnvaddd1, lag(aic 8) trend
Im-Pesaran-Shin unit-root test for lnvaddd1
-------------------------------------------
Ho: All panels contain unit roots           Number of panels  =      0
Ha: Some panels are stationary              Number of periods =     47
AR parameter: Panel-specific                Asymptotics: T,N -> Infinity
Panel means:  Included                                        sequentially
Time trend:   Included
ADF regressions: 0.00 lags average (chosen by AIC)
------------------------------------------------------------------------------
                    Statistic      p-value
------------------------------------------------------------------------------
 W-t-bar                   .             .
------------------------------------------------------------------------------

It is obviously wrong since the number of panels become zero.

I donot know where goes wrong. All I want to know is that the variable is not stationary in level, so I take first difference, see if they are stationary.
If the data are stationary after taking first difference, then I want to say they are I(1), then I can go to next step to test the cointegration.

I really hope someone can help me.
Thank you.
Tong


 

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