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Analysts from our Institute collect, analyse and process large amounts of data in the course of their research. Here we share the results of their work, such as applications, scripts and databases. These materials are available free of charge. When using them, please cite the original source.
pixabay_PESCADF
PESCADF: Stata module to perform Pesaran's CADF panel unit root test in presence of cross section dependence

PESCADF runs the t-test for unit roots in heterogenous panels with cross-section dependence, proposed by Pesaran (2003). Parallel to Im, Pesaran and Shin (IPS, 2003) test, it is based on the mean of individual DF (or ADF) t-statistics of each unit in the panel. Null hypothesis assumes that all series are non-stationary. To eliminate the cross dependence, the standard DF (or ADF) regressions are augmented with the cross section averages of lagged levels and first-differences of the individual series (CADF statistics). Considered is also a truncated version of the CADF statistics which has finite first and second order moments. The exact critical values of the t-bar statistic are given by Pesaran (2003). The critical values and summary statistics of the individual t are also given in the paper, so the Z [t-bar] statistic (parallel to IPS (2003) Z [t-bar]) is distributed standard normal under the null hypothesis of nonstationarity.   Windows users can install the test directly from Stata with a command “ssc install pescadf”.   Program code Help file   When using the script, please include the following citation: Lewandowski, P., 2007. PESCADF: Stata module to perform Pesaran’s CADF panel unit root test in presence of cross section dependence, Statistical Software Components. Boston College Department of Economics.   Piotr Lewandowski, Institute for Structural Research