pdR (version 1.9.4)

ipsHEGY: IPS-HEGY seasonal unit root test in panel data, Otero et al.(2007).

Description

This function performs panel data-based HEGY seasonal unit root test, the asymptotics is based upon Otero et al.(2007).

Usage

ipsHEGY(data,deterministic =c(1,0,0),lag.method="AIC",maxlag=12,CIPS = TRUE)

Value

P_HEGY

Panel HEGY statistics.

U_HEGY

Idividual HEGY statistics of N units.

Arguments

data

Panel data, T by N

deterministic

Options for deterministic components.
c(1,0,0), intercept only.
c(0,1,0), trend only.
c(0,0,1),, season dummy only.

lag.method

Selection of optimal lags, having for options: "fixed","AIC", "BIC", "AICc".

maxlag

Maximum number of lags for searching optimal criteria.

CIPS

Logical. If TRUE, using Pesaran(2007) to account for cross-section correlation. The default is TRUE.

Author

Ho Tsung-wu <[e-mail]>, College of Management, National Taiwan Normal University.

Details

Mode for selectlags has four options, AIC,AICc and BIC use R built-in functions for linear model and their meanings are popular and straightforward. "fixed" fixes maxlag as the number of lags.
The critical values for panel HEGY are standard normal for individual t-ratios, however,you need to perform simulation for the critical values of F joint test, at pdR 1.3. To this end, you are encouraged to work this out for yourself: using arima.sim() to sample seasonal time series with unit root (1-order difference) and obtain their statistics under the null using ipsHEGY(), then it is streightforward to obtain critical values.
Otero et al. (2007) provide critical values for quarterly frequency.
The univariate HEGY is based on R package uroot, simply modified to include cross-secionaal average.

References

Otero, J., Smith, J., and Giulietti, M. (2005) Testing for seasonal unit roots in heterogeneous panels. Economics Letters, 86, 229-235.
Otero, J., Smith, J., and Giulietti, M. (2007) Testing for seasonal unit roots in heterogeneous panels in the presence of cross section dependence. Economics Letters, 86, 179-184.
Pesaran M. Hashem (2007) A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22, 265-312.

Examples

data(inf_M)

#Seasonal dummy only takes quarters 1:3, 
#becasue of the presence of common intercept.

OUT<-ipsHEGY(inf_M, deterministic = c(1,1,1), lag.method = "AIC", maxlag = 12,CIPS=TRUE)
OUT$P_HEGY
OUT$U_HEGY


# Simulation of critical values