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help for urcovar
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Perform Elliott-Jansson test for unit roots with stationary covariates

Syntax

        urcovar depvar varlist [if exp] [in range] [, maxlag(#) case(#)
              firstobs ]

urcovar is for use with time-series data.  You must tsset your data before
using urcovar; see tsset. You may apply urcovar to a single time series of a
panel dataset. varlist may contain time-series operators; see help varlist.

Description

urcovar performs the test for a unit root in depvar in the context of one or
more stationary covariates (listed in varlist) which was proposed by Elliott
and Jansson (2003) as a generalization of the CADF test of Hansen (1995). The
Elliott-Jansson test constructs a VAR in the model of the stationary covariates
and the quasi-difference of depvar. As in the Dickey-Fuller (dfuller) or
Elliott-Rothenberg-Stock DF-GLS (dfgls) unit root tests, the model can include
no deterministic terms, constants or constants and time trends. The
deterministic model is specified by the case option.


Options

varlist specifies the set of stationary regressors. At least one must be
    provided.

maxlag(#) specifies the number of lags to be used in computing the VAR. If not
    provided, one lag is assumed.

case(#) specifies the deterministic features of the model. Case 1 specifies no
    constant nor trend in the representation of depvar and varlist. Case 2
    allows a constant in the representation of depvar. Case 3 allows for
    constants in both depvar and varlist.  Case 4 also allows for a trend in
    the representation of depvar. Case 5 imposes no restrictions, allowing for
    constants and trends in both depvar and varlist. If not specified, case 1
    is tested.

firstobs specifies that the first observation of depvar should be used to
    define the first quasi-difference. If the option is not specified, that
    quasi-difference is set to zero.


Saved results

urcovar returns the names of depvar and varlist and the value of case and
maxlag in the return list. As well, the test statistic lambda, interpolated 5%
critical value (crit5) and estimated R-squared (r2) are returned.  See return
list.


Examples

        . use http://fmwww.bc.edu/ec-p/data/macro/blanquah

        . urcovar PINCOME UNRATE, case(3) maxlag(8)

        . urcovar PINCOME UNRATE, case(5) maxlag(8)


Acknowledgements

I am grateful to Graham Elliott for clarifications of the logic of this routine
> . 
Remaining errors are my own.

References

Elliott, G. and Jansson, M., 2003. Tests for Unit Roots with Stationary
    Covariates.  Journal of Econometrics, Vol. 115, pp. 75-89.

Elliott, G. and Pesavento, E., 2006. On the Failure of Purchasing Power Parity
    for Bilateral Exchange Rates after 1973. Journal of Money, Credit and
    Banking, Vol. 38, pp. 1405-1430.

Hansen, B.E., 1995. Rethinking the univariate approach to unit root testing:
    using covariates to increase power. Econometric Theory, Vol. 11, 1148-1172.

Citation

urcovar is not an official Stata command. It is a free contribution to the
research community, like a paper. Please cite it as such:

    Baum, C.F., 2007.  urcovar: Stata module to perform Elliott-Jansson test
        for unit roots with stationary covariates.
        http://ideas.repec.org/c/boc/bocode/s456863.html

Author

Christopher F Baum, Boston College, USA
baum@bc.edu


Also see

On-line:  help for dfgls