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Chang_IV1

Chang Panel Unit Root Test

CALLING SEQUENCE

res = Chang_IV1(Y,t_order,LagOrders,pmax,IGF,signif)

PARAMETERS

Input

* Y = matrix (T,N) of observations

  The data matrix may be unbalanced.

  Missing Values must be specified as %nan

* t_order = -1 : no individual effect

       0 : individual effects (Default)

       1 : individual effects and time trends

* LagOrders =

  - %nan if the user wants the program to determine the optimal lag order for each country (pmax=12 or T/4)

  - a vector (N x 1) or (1 x N) of optimal lags for all the individuals of the panel

* pmax = Maximum of the lag order authorized

* IGF (Instrument Generating Function) function

     = 1 : F(x) = x*exp(-ci*|x|) (Default)

     = 2 : F(x) = I(|x|<K) Trimmed OLS on [-K,K]

     = 3 : F(x) = I(|x|<K)*x

* signif = significance level for the individual ADF tests (0.05, 0.01 or 0.1)

 

Output

* res= a results tlist with:

  - res('meth') = 'Chang IV'

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

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

  - res('y') = (T x k) matrix of data

  - res('Sn') = Average IV t-ratio statistic (distributed as N(0,1) under H0)

  - res('Sn_critical') = Critical Values of normal N(0,1) at 1%, 5% and 10%

  - res('Sn_pvalue') = Pvalue of the average IV t-ratio statistic

  - res('Zi') = Individual IV t-ratio statistics

  - res('Zi_critical') = Critical Values of normal N(0,1) at 1%, 5% and 10%

  - res('Zi_pvalue') = Pvalue of the individual IV t-ratio statistics

  - res('pi') = Individual lag orders

  - res('ADF') = Individual ADF statistics for comparison

  - res('AR_IV_ind') = Individual IV estimates of the autoregressive parameter

  - res('var_resIV') = Variance of Residuals of IV estimates for each unit

  - res('var_IV') = Variance of the IV estimator of the autoregressive parameter

  - res('IGF') = Instrument Generating Function used

  - res('K') = Constant K of IGF function (IGF 2 and 3 only)

  - res('ci') = Factor ci for IGF 1 : F(x)=x*exp(-ci*|x|)

DESCRIPTION

Chang (2002) Unit Root Tests on Panel Data (ref: Chang (2002): "Nonlinear IV unit root test in panels with cross sectional dependency", Journal of Econometrics, 110, 261-292), vol. 108, pp. 1–24).

EXAMPLE

load(GROCERDIR+'/data/gdpan_oecd.dat');
Y=explone(dblist(GROCERDIR+'/data/gdpan_oecd.dat'));
// extract matrix of data present in database
res=Chang_IV1(log(Y),0,%nan,5,1,0.05)
// Provides the Chang test for all (logartithm of) Y columns,
// with a constant but not trend (arg # 2 = 0),
// the Lag order to be determined by the program (arg # 3 = %nan),
// the maximum number of lags set to 5  (arg # 4 = 5),
// the function F(x)=x*exp(-ci*|x|) used as an instrument generating function (arg # 5 set to 1)
// and a 5% significance level (arg # 5 set to 0.05).
 
res = Chang_IV1(Y,1,2*ones(size(Y,2),1),%nan,2,0.1)
// Provides the Chang test for all (logartithm of) Y columns,
// with a constant and a trend (arg # 2 = 1),
// the Lag order set to 2 for all variables,
// the maximum number of lags set to %nan because it is irrelevant (arg # 4 = %nan),
// the function F(x)=I(|x|&lt;K) used as an instrument generating function (arg # 5 set to 2)
// and a 10% significance level (arg # 6 set to 0.1).

AUTHOR

Christophe Hurlin 2004 / Eric Dubois 2008

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