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Levin_Lin1

Levin and Lin Panel Unit Root Test

CALLING SEQUENCE

res = Levin_Lin1(Y,t_order,LagOrders,pmax,bandwidth,kern,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

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

        'N' for the Newey-West (1994)'s non parametric bandwidth parameter

        'A' for the Andrews (1991) automatic bandwidth parametr selection with AR(1) structure

* kern = 'B' for Bartlett (Default)

      'QS' for Quadratic Spectral (not possible when bandwidth = 'C')

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

 

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)

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(GROCERDIR+'/data/gdpan_oecd.dat');
Y=explone(dblist(GROCERDIR+'/data/gdpan_oecd.dat'));
// extract matrix of data present in database
res=Levin_Lin1(log(Y),0,%nan,5,'C','B',0.05)
// Provides the Levin and Lin test for all 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).
 
res = Levin_Lin1(Y,1,2*ones(size(Y,2),1),%nan,'N','B',0.05)
// xample 2 is provides the Levin and Lin test for all 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),
// with Newey-West bandwidth (arg 5 set to 'N') and Barlett kernel.

AUTHOR

Christophe Hurlin 2004 / Eric Dubois 2008

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