*! version 1.0.0 May2014
help xtcsi

Title

xtcsi -- Investigating Residual Cross-Section Independence

Syntax

xtcsi depvar indepvars [if] [in] [, trend ]

Description

xtcsi implements in balanced panel time-series data, error test for cross-section independence: i) the Breusch and Pagan (1980) LM test;
ii) the Pesaran, Ullah and Yamagata (2008) bias-adjusted LM test; iii) the Pesaran (2004) CD test.

The null hypothesis is:

H0: Cov(uit,ujt) = 0 for all t and i!=j

Background

Cross-section dependence in macro panel data has received a lot of attention in the emerging panel
time series literature over the past decade (for an introduction to panel time series see Eberhardt, 2009).
This type of correlation may arise from globally common shocks with heterogeneous impact across countries,
such as the oil crises in the 1970s or the global financial
crisis from 2007 onwards. Alternatively it can be the result of local spillover effects between countries or
regions. For a detailed discussion of the topic within cross-country empirics see Eberhardt and Teal (2011).
For a survey and application of existing cross-section dependence tests refer to Moscone and Tosetti (2009).

Options

trend specifies a group-specific linear trend to be included in the regression model.

Return values

Scalars
r(N_g) Number of panel members
r(lm) Breusch and Pagan (1980) LM test statistic
r(p_lm) p-value of chi-squared with N(N -1)/2 degrees of freedom
r(lm_adj) Pesaran, Ullah and Yamagata (2008) bias-adjusted LM test statistic
r(p_lm_adj) two-sided p-value of Normal(0,1)
r(lm_cd) Pesaran (2004) CD test statistic
r(p_lm_cd) two-sided p-value of Normal(0,1)

Other packages needed

matpwcorr
xtmg

References

Pesaran, Ullah and Yamagata (2008). "A bias-adjusted LM test of error cross-section independence."
Econometrics Journal, volume 11, pp. 105–127.

Acknowledgements

This routine was made with the helpful advice of Tamara Burdisso. Any errors are my own.

Author

Maximo Sangiacomo
Email: msangia@hotmail.com

Also see

Online: help for xtcsd (if installed), xtmg (need to be installed)