Zivot-Andrews Unit Root Test
Posted: Mon Oct 05, 2009 6:59 am
Attached is a subroutine to carry out Zivot-Andrews procedure for testing unit root in the case of a single break in the series (i.e. level, trend or both). Please feel free the optimize the code further.
Code: Select all
'Zivot-Andrews Unit Root Test
'Reference: Zivot, E. and Andrews, D. W. K. (1992), “Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis”, Journal of Business & Economic Statistics, Vol. 10, No. 3, pp. 251-270.
call zivot(y,"C",4)
' ----------------------------------------------------------------------------------------------------
' Arguments
'-----------------------------------------------------------------------------------------------------
'series Y ' dependent variable
'scalar Maxlag ' Maximum number of lags for unit root testing
'string %Model ' Location of the break ("A" = Intercept, "B" = Trend, "C" = Both)
' ----------------------------------------------------------------------------------------------------
subroutine zivot(series y,string %Model,scalar maxlag)
!trim = 0.15 'Trimming parameter
series DY = D(Y)
!nobs = @obs(y)-maxlag-1
smpl @first+maxlag+1 @last
equation temp.ls dy c @trend y(-1)
!aic0 = log(temp.@ssr/!nobs)+2*(temp.@ncoef/!nobs)
!bic0 = log(temp.@ssr/!nobs)+ log(!nobs)*(temp.@ncoef/!nobs)
!min_aic = !aic0
for !lag=maxlag to 1 step -1
equation temp.ls dy y(-1) c @trend dy(-1 to -!lag)
!aic = log(temp.@ssr/!nobs)+2*(temp.@ncoef/!nobs)
!bic = log(temp.@ssr/!nobs)+log(!nobs)*(temp.@ncoef/!nobs)
if !aic < !min_aic then
!min_aic = !aic
!best_lag = !lag
else if !min_aic = !aic0 then
!best_lag =0
endif
endif
next
smpl @all
!znobs = @obs(y) - !best_lag
!lower = 1+!best_lag+@round(!znobs*!trim)
!upper = @obs(y)-@round(!znobs*!trim)
vector(!upper-!lower+1) results
smpl @first + !best_lag @last
for !i = !lower to !upper
if !best_lag=0 and %Model = "A" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2)
else if !best_lag=0 and %Model = "B" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2)*(@trend-!i+2)
else if !best_lag=0 and %Model = "C" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2) (@trend>!i-2)*(@trend-!i+2)
else if !best_lag>0 and %Model = "A" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2) DY(-1 to -!best_lag)
else if !best_lag>0 and %Model = "B" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2)*(@trend-!i+2) DY(-1 to -!best_lag)
else if !best_lag>0 and %Model = "C" then
equation temp.ls DY Y(-1) C @trend (@trend>!i-2) (@trend>!i-2)*(@trend-!i+2) DY(-1 to -!best_lag)
endif
endif
endif
endif
endif
endif
results(!i-!lower+1) = temp.@tstats(1)
next
vector t_min =@cmin(results)
!t_min = t_min(1)
vector break = @cimin(results)+!lower-1
!break = break(1)
series DT = (@trend>!break-2)*(@trend-!break+2)
if %Model = "A" or %Model="C" then
series DU = @trend> !break-2
endif
if !best_lag=0 and %Model="A" then
equation ZA.ls DY Y(-1) C @trend DU 'Selected equation
else if !best_lag=0 and %Model="B" then
equation ZA.ls DY Y(-1) C @trend DT 'Selected equation
else if !best_lag=0 and %Model="C" then
equation ZA.ls DY Y(-1) C @trend DU DT 'Selected equation
else if !best_lag>0 and %Model = "A" then
equation ZA.ls DY Y(-1) C @trend DU DY(-1 to -!best_lag) 'Selected equation
else if !best_lag>0 and %Model = "B" then
equation ZA.ls DY Y(-1) C @trend DT DY(-1 to -!best_lag) 'Selected equation
else if !best_lag>0 and %Model = "C" then
equation ZA.ls DY Y(-1) C @trend DU DT DY(-1 to -!best_lag) 'Selected equation
endif
endif
endif
endif
endif
endif
table(6,2) ZAZ
ZAZ(1,1) = "Variable(s)"
ZAZ(3,1) = "t-stat(s)"
ZAZ(4,1) = "Lag(s)"
ZAZ(5,1) = "Break"
ZAZ(6,1) = "DU1 p-value"
ZAZ(1,2) = y.@name
ZAZ(3,2) = !t_min
ZAZ(4,2) = !best_lag
if @datestr(@now,"F") = "?" then
ZAZ(5,2) = !break
else
ZAZ(5,2) = @otod(!break)
endif
ZAZ(6,2) = @tdist(za.@tstat(4),za.@regobs-za.@ncoef)
setline(ZAZ, 2)
show ZAZ
smpl @all
delete temp break results t_min
endsub