CSD test (pesaran 2007)

[Fatema19]

Dear all,
Hello,

Just want you to know, after runing the CSD test (pesaran CD), how can i know if my variables have the CSD or not ? I mean what are the H0 and H1 ?

Thanks in advance.

[EViews Glenn]

The null is that there is no contemporaneous correlation in the residuals between the disturbances in different cross-section units. The alternative is that there is contemporaneous correlation.

http://www.eviews.com/help/helpintro.ht ... 23ww191025

[Fatema19]

Thank you for your response.

But actually, i'm not talking about the diagnostic test for residuals but for variables as i want to do CSD test for my variables before doing unit root test as i read in a forum that :

"before stationarity check, observe cross-sectional dependence in your panels (usually Pesaran CD “Cross-Sectional Dependence Test”).
Third, if you have cross-sectional dependence in your variables, you will apply 2nd generation unit root tests like Breitung, Pesaran CIPS (Cross-sectional Augmented Im-Pesaran-Shin), and/or CADF (Cross-section Augmented Dickey-Fuller). If the variables do not suffer from cross-sectional dependence, you can proceed with 1st generation unit root tests like LLC (Levin, Lin, and the Chu), Hadri, IPS (Im-Pesaran-Shin), Fisher type ADF and/or PP, etc. You will need to read about each unit root test if it is appropriate for your data."

So to choose between first generation and second one, i should do CSD test, and i want to know what are the hypothesis that i should use for that.

Thank you in advance

[EViews Glenn]

Sorry I missed seeing this question.

The CSD test is available on a series in a panel workfile. Simply open the series, select View/Cross-section Dependence Test.

[solnlink]

The null hypothesis being tested is that there is no cross-section dependence or there is cross-section independence across individuals in the panel. If the probability value is less than the 0.05 alpha level, you reject the null, otherwise you cannot reject the null.