Implementing the Leybourne-Taylor test for seasonal unit roots in Stata

Christopher Baum and Jesus Otero

London Stata Conference 2018 from Stata Users Group

Abstract: We estimate response surface coefficients for a large range of quantiles of the Leybourne and Taylor (2003, Journal of Time Series Analysis 24: 441–460) test for the presence of seasonal unit roots. This test statistic offers greater power gains in comparison with the familiar regression-based approach advocated by Hylleberg, Engle, Granger and Yoo (1990, Journal of Econometrics 44: 215–238), which is currently implemented in Stata via the command sroot, developed by Depalo (2009, Stata Journal 9: 422–438), and the further extensions introduced by the command hegy by del Barrio Castro, Bodnar and Sanso ́ (2016, Stata Journal 16: 740–760). The main feature of the Leybourne and Taylor test is that it achieves power gains through the use of forward and reverse HEGY regressions. The estimated response surfaces allow for different combinations of number of observations T and lag order in the test regressions p, where the latter can be either specified by the user or endogenously determined by the underlying data. The critical values depend on the method used to select the number of lags. We introduce the new Stata command ltsur and illustrate its use with an empirical example. The new command permits the computation of the Leybourne and Taylor test statistics along with their associated critical values and approximate probability values.

Date: 2018-10-15
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Persistent link: https://EconPapers.repec.org/RePEc:boc:usug18:10

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