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Levin_Lin

Levin and Lin Panel Unit Root Test

CALLING SEQUENCE

res = Levin_Lin(arg1,…,argn)

PARAMETERS

Input

• arg1,…, argn: arguments that can be:

  • • a panel data tlist (in that case there must be an argument 'namevar=xxx' to indicate the name of the variable in the panel, see below)

  • • the strings:

      - 'lagorders=x' with x=%nan (if the lags for the ADF test are to be determined automatically) or a (N x 1) or (1 x N) vector of lags for the ADF test

      - 'pmax=x' with x=%nan or a number if for the maximal # of lags for the ADF test

      - 'signif=x' with x the significance level for the individual ADF tests (0.05, 0.01 or 0.1)

      - 't_order=x' for the trend order with x:

         -1: no constant, no trend

    • 0: a constant, no trend (default)

    • 1: a constant and a trend

      - 'bandwidth=n' with:

    • n = 'C' (Default) common lag troncature for the Bartlett kernel (Levin and Lin 2003)

    • n = 'N' for the Newey West (1994)'s non parametric bandwidth parameter

    • n = 'A' for the Andrews (1991) automatic bandwidth parameter selection with AR(1) structure

      - 'kernel=n' with:

    • n = 'b' for Bartlett (Default)

    • n= 'qs' for Quadratic Spectral (not possible when bandwidth = 'C')

      - 'signif=x' with x the signifance level

      - 'noprint' if the user does not want to print the results of the test

      - 'namevar=xx' where xx is the name of the variable in the panel (only if the data are in a 'panel data' tlist, see help paneldb)

    • a time series

    • a real (nxp) matrix

    • a string equal to the name of a time series or a (nxp) real matrix between quotes (note that there must be several variables of this type tos be able to perform a panel unit root test)

    Output

    • res a results tlist with:

      - res('meth') = 'Levin-Lin'

      - res('y') = (T x k) matrix of data

      - res('tstat') = (T x k) matrix of data

      - res('critical') = Critical Values at 1%, 5% and 10% for the N(0,1) distribution

      - res('pvalue') = Pvalue for the corrected statistic

      - res('rho') = Estimate of the common autoRegresive parameter

      - res('var_rho') = Variance of the estimator of the common autoRegresive parameter

      - res('mu_star') = Mean Adjustement Factor

      - res('sig_star') = Variance Adjustement Factor

      - res('bandwidth') = Method to fix the bandwidth parameter

      - res('kernel') = kernel function

      - res('h') = Bandwicth parameter

      - res('omega') = Individual Long run variances of first differences

      - res('si') = Individual Ratios of long run standard deviation to the innovation SE

      - res('pi') = Individual lag order in ADF regressions

      - res('pmax') = Maximum lag order for ADF individual regressions

      - res('Ti1') = Auxiliary Regression 1: Adjusted individual size, starting date and ending date

      - res('Ti2') = Auxiliary Regression 1: Adjusted individual size, starting date and ending date

      - res('t_order') = the trend order (-1, 0 or 1)

      - res('t_orderlit') = the trend order in plain english

      - res('tstat_nc') = Non corrected t-statistic (if t_order == 1 only)

      - res('pvalue_nc') = Pvalue for non corrected t-statistic (if t_order == 1 only)

      - res('prests') = boolean indicating the presence or absence of a time series in the regression

      - res('namey') = name of the y variable

      - res('dropna') = boolean indicating if NAs have been dropped

      - res('bounds') = if there is a timeseries in the regression, the bounds of the regression

      - res('nonna') = vector indicating position of non-NAs

    DESCRIPTION

    Levin and Lin (1992) Unit Root Tests on Panel Data (ref: Levin, Lin and Chu (2002), "Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties", Journal of Econometrics), vol. 108, pp. 1–24).

    EXAMPLE

    // load the database containing the GDP for 25 countries in the OECD over the period 1963-2003
    load(GROCERDIR+'/data/gdpan_oecd.dat');
    // retrieve the names of all variables in database
    listvar=dblist(GROCERDIR+'/macros/grocer/db/gdpan_oecd.dat')
     
    res = Levin_Lin('log('+listvar+')','pmax=4','t_order=0') 
    // Provides the Levin and Lin test for all variables in the database, taken in logarithm, with a constant but not trend ('t_order=0'), the Lag order to be determined by the program, the maximum number of lags set to 4 (arg 'pmax=4'), default bandwidth and kernel. 
     
    res = Levin_Lin('log('+listvar+')','pmax=4','t_order=0','bandwidth=n','kernel=b','noprint')
    // does the same but with Newey-West bandwidth ('bandwidth=n') and Barlett kernel ('kernel=b') and the results are not printed (but could be printed later with the instruction prt_panelur(res)).

    AUTHOR

    Christophe Hurlin 2004 / Eric Dubois 2008

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