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NHARVEY: Stata module to perform Nyblom-Harvey panel test of common stochastic trends

Author

Listed:
  • Christopher F Baum

    () (Boston College)

  • Fabian Bornhorst

    () (European University Institute)

Abstract

nharvey estimates one form of the test of common stochastic trends developed by Nyblom and Harvey (NH, 2000). The test is of the validity of a specified value of the rank of the covariance matrix of the disturbances driving the multivariate random walk. This rank is equal to the number of common trends, or levels, in the series. As NH show, "this test is very simple insofar as it does not require any models to be estimated, even if serial correlation is present." (p.176) The special case calculated by nharvey is that of the rank (K in NH' terms) equalling zero, which may be taken as a test that there are no common trends among the variables. NH state that "common trends imply cointegration, and vice versa." Thus a failure to reject the null hypothesis of zero common trends is also an indication that the variables do not form a cointegrated combination. The test may be considered as a generalization of the Nyblom and Makelainen (1983) and Kwiatkowski et al. (1992, kpss) univariate tests for stationarity of a series. Those tests are of the null hypothesis that the series is stationary, or stationary around a deterministic trend, against the alternative that a random walk component is present. nharvey considers the same structure in the context of multiple time series.

Suggested Citation

  • Christopher F Baum & Fabian Bornhorst, 2001. "NHARVEY: Stata module to perform Nyblom-Harvey panel test of common stochastic trends," Statistical Software Components S419703, Boston College Department of Economics, revised 31 Oct 2007.
  • Handle: RePEc:boc:bocode:s419703
    Note: This module may be installed from within Stata by typing "ssc install nharvey". Windows users should not attempt to download these files with a web browser.
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    File URL: http://fmwww.bc.edu/repec/bocode/n/nharvey.ado
    File Function: program code
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    File URL: http://fmwww.bc.edu/repec/bocode/n/nharvey.hlp
    File Function: help file
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    Keywords

    panel data; stationarity; common trends;

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