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st: unit root in balanced panel


From   Andreas Pondorfer <Andreas.Pondorfer@student.uibk.ac.at>
To   STATALIST <statalist@hsphsun2.harvard.edu>
Subject   st: unit root in balanced panel
Date   Wed, 16 Feb 2011 14:28:59 +0100

Dear Statalist,

I have a question concerning unit root test for balanced panels.

I´m examining climate impact on production in Sub-Sahara Africa, therefore
I run a CD-production function with a two way fixed effects model:

yit = a + xitb + vi + Dt + eit

After running the regression, I tested for serrial correlation. The results of
xtserial and xtregar, lbi indicate autocorrelation.

Thereafter I wanted to test if the panel series are stationary. For that I used
the ipshin command, which is a test for unit root in heterogenous panels.

Here, I have problems with the interpretation of the unit root test results.
I have seven input variables. Stationarity is given for the output variable and for 6 out of 7 input variables. One variable includes a unit root.

Do I need to reject stationarity for the whole panel series?

When doing First differences, all the data is stationary.

What do you recommend?

Thanks for your help!





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