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Stataimplementsavarietyoftestsforunitrootsorstationarityinpaneldatasetswithxtunitroot.TheLevinLin
Chu(2002),HarrisTzavalis(1999),Breitung(2000BreitungandDas2005),ImPesaranShin(2003),and
Fishertype(Choi2001)testshaveasthenullhypothesisthatallthepanelscontainaunitroot.TheHadri(2000)
Lagrangemultiplier(LM)testhasasthenullhypothesisthatallthepanelsare(trend)stationary.Optionsallow
youtoincludefixedeffectsandtimetrendsinthemodelofthedatageneratingprocess.

Theassortedtestsmakedifferentasymptoticassumptionsregardingthenumberofpanelsinyourdatasetand
thenumberoftimeperiodsineachpanel.xtunitroothasallyourbasescovered,includingtestsappropriatefor
datasetswithalargenumberofpanelsandfewtimeperiods,datasetswithfewpanelsbutmanytimeperiods,
anddatasetswithmanypanelsandmanytimeperiods.Themajorityofthetestsassumethatyouhavea
balancedpaneldataset,buttheImPesaranShinandFishertypetestsallowforunbalancedpanels.

Wehavedataonthelogofrealexchangeratesforalargepanelofcountriesfor34years.Hereweapplythe
LevinLinChutesttoasubsetofdatafortheG7countriestoexaminewhethertheserieslnrxratecontainsa
unitroot.BecauseweusetheUnitedStatesasthenumerairewhencomputingthelnrxrateseries,thissubsetof
datacontainssixpanels.

http://www.stata.com/features/overview/paneldataunitroottests/ 1/3
4/7/2017 Paneldataunitroottests|Stata

. xtunitroot llc lnrxrate if g7, lags(aic 10)

Levin-Lin-Chu unit-root test for lnrxrate

Ho: Panels contain unit roots Number of panels = 6

Ha: Panels are stationary Number of periods = 34

AR parameter: Common Asymptotics: N/T -> 0

Panel means: Included
Time trend: Not included

ADF regressions: 1.00 lags average (chosen by AIC)

LR variance: Bartlett kernel, 10.00 lags average (chosen by LLC)

Statistic p-value
Unadjusted t -6.7538
Adjusted t* -4.0277 0.0000

Theheaderoftheoutputsummarizesthetest.Thenullhypothesisisthattheseriescontainsaunitroot,andthe
alternativeisthattheseriesisstationary.Astheoutputindicates,theLevinLinChutestassumesacommon
autoregressiveparameterforallpanels,sothistestdoesnotallowforthepossibilitythatsomecountriesreal
exchangeratescontainunitrootswhileothercountriesrealexchangeratesdonot.Eachtestperformedby
xtunitrootalsomakesexplicittheassumedbehaviorofthenumberofpanelsandtimeperiods.TheLevinLin
Chutestwithpanelspecificmeansbutnotimetrendrequiresthatthenumberoftimeperiodsgrowmorequickly
thanthenumberofpanels,sotheratioofpanelstotimeperiodstendstozero.Thetestinvolvesfittingan
augmentedDickeyFullerregressionforeachpanelwerequestedthatthenumberoflagstoincludebe
selectedbasedontheAICwithatmost10lags.Toestimatethelongrunvarianceoftheseries,xtunitrootby
defaultusestheBartlettkernelusing10lagsasselectedbythemethodproposedbyLevin,Lin,andChu.

TheLevinLinChubiasadjustedtstatisticis4.0277,whichissignificantatalltheusualtestinglevels.
Therefore,werejectthenullhypothesisandconcludethattheseriesisstationary.Whenweusethedemean
optiontoxtunitroottoremovecrosssectionalmeansfromtheseriestomitigatetheeffectsofcrosssectional
correlation,weobtainateststatisticthatissignificantatthe5%levelbutnotatthe1%level.

BecausetheLevinLinChutestrequiresthattheratioofthenumberofpanelstotimeperiodstendtozero
asymptotically,itisnotwellsuitedtodatasetswithalargenumberofpanelsandrelativelyfewtimeperiods.Here
weusetheHarrisTzavalistest,whichassumesthatthenumberofpanelstendstoinfinitywhilethenumberof
timeperiodsisfixed,totestwhetherlnrxrateinourentiredatasetof151countriescontainsaunitroot:

. xtunitroot ht lnrxrate
Harris-Tzavalis unit-root test for lnrxrate

Ho: Panels contain unit roots Number of panels = 151

Ha: Panels are stationary Number of periods = 34

AR parameter: Common Asymptotics: N -> Infinity

Panel means: Included T Fixed
Time trend: Not included

Statistic z p-value
rho 0.7534 -22.0272 0.0000

Herewefindoverwhelmingevidenceagainstthenullhypothesisofaunitrootandthereforeconcludethat
lnrxrateisstationary.

References
http://www.stata.com/features/overview/paneldataunitroottests/ 2/3
4/7/2017 Paneldataunitroottests|Stata
References
Breitung,J.2000.
Thelocalpowerofsomeunitroottestsforpaneldata.AdvancesinEconometrics,Volume15:
NonstationaryPanels,PanelCointegration,andDynamicPanels,ed.B.H.Baltagi,161178.Amsterdam:
JAYPress.

Breitung,J.,andS.Das.2005.
Panelunitroottestsundercrosssectionaldependence.StatisticaNeerlandica59:414433.

Choi,I.2001.
Unitroottestsforpaneldata.JournalofInternationalMoneyandFinance20:249272.

Hadri,K.2000.
Testingforstationarityinheterogeneouspaneldata.EconometricsJournal3:148161.

Harris,R.D.F.,andE.Tzavalis.1999.
Inferenceforunitrootsindynamicpanelswherethetimedimensionisfixed.JournalofEconometrics91:
201226.

Im,K.S.,M.H.Pesaran,andY.Shin.2003.
Testingforunitrootsinheterogeneouspanels.JournalofEconometrics115:5374.

Levin,A.,C.F.Lin,andC.S.J.Chu.2002.
Unitroottestsinpaneldata:Asymptoticandfinitesampleproperties.JournalofEconometrics108:124.

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