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help for ipshin                         (StataList distribution 01 August 2001)
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Im-Pesaran-Shin panel unit root test

ipshin varname [if exp] [in range] ,lags(numlist) [ trend nodemean ]

ipshin is for use with panel data. You must tsset your data before using ipshin, using the panel form of tsset; see help tsset.

varname may contain time-series operators; see help varlist.

Users of Stata 11+ should use the official xtunitroot ips command.

Description

ipshin estimates the t-test for unit roots in heterogeneous panels developed by Im, Pesaran and Shin (IPS, 2003). It allows for individual effects, time trends, and common time effects. Based on the mean of the individual Dickey-Fuller t-statistics of each unit in the panel, the IPS test assumes that all series are non-stationary under the null hypothesis. Lags of the dependent variable may be introduced to allow for serial correlation in the errors. The exact critical values of the t-bar statistic are given in IPS. After transformation by factors provided in the paper, the W[t-bar] statistic (4.10) is distributed standard normal under the null hypothesis of nonstationarity. (Note that in the working paper version, this statistic was known as Psi-bar (5.3)). The tables in the paper limit the calculation of this statistic to a maximum of 8 lags in any series.

Unlike the Levin and Lin (1993) test, which assumes that all series are stationary under the alternative, IPS is consistent under the alternative that only a fraction of the series are stationary.

Options

lags must be specified, and may take on any non-negative value. If a single value is provided, that lag length is used for all individuals. If a list of lags is provided (perhaps with a local macro), its length must match the number of individuals in the panel.

trend includes a time trend in the estimated equation.

nodemean omits the elimination of common time effects.

Examples

. use http://fmwww.bc.edu/ec-p/data/hayashi/sheston91.dta,clear

. ipshin rgdppc if country<11, lag(2)

. ipshin rgdppc if country<11, lag(2 2 2 3 3 3 4 4 4 4) nodemean

. ipshin D.rgdppc if country<11, lag(2) trend

References

Banerjee, Anindya. Panel Data Unit Roots and Cointegration: An Overview. Oxford Bulletin of Economics and Statistics, Special Issue, 607-629, 1999.

Kyung So Im, M. Hashem Pesaran, Yongcheol Shin, Testing for Unit Roots in Heter > ogeneous Panels. Journal of Econometrics, 2003, 115, 53-74. Earlier version available as > unpublished Working Paper, Dept. of Applied Economics, University of Cambridge, > Dec. 1997 (http://www.econ.cam.ac.uk/faculty/pesaran/lm.pdf)

Levin, Andrew and Lin, Chien-Fu. Unit Root Tests in Panel Data: New Results, University of California at San Diego Discussion Paper No. 93-56, 1993.

Acknowledgements

We thank Gene Liang, Herbert BrŸcker and Piotr Lewandowski for pointing out err > ors in the routine.

Authors

Fabian Bornhorst, European University Institute, Italy, Fabian.Bornhorst@iue.it Christopher F Baum, Boston College, USA, baum@bc.edu

Also see

On-line: help for dfuller, madfuller (if installed), levinlin (if installed)