xtrec

Panel Unit Root Test Based on Recursive Detrending

Overview

xtrec implements the recursively detrended panel unit root tests proposed by Westerlund (2015). Two variants are provided:

• t-REC: Basic test assuming iid errors
• t-RREC: Robust test accounting for serial correlation, cross-sectional dependence, and heteroskedasticity

Both tests have a standard normal limiting distribution, requiring no mean or variance correction factors.

Installation

# CRAN
install.packages("xtrec")

# Development version
# # remotes::install_github("muhammedalkhalaf/xtrec")
install.packages("xtrec", repos = c('https://muhammedalkhalaf.r-universe.dev', 'https://cloud.r-project.org'))

Usage

library(xtrec)

# Load example data
dat <- grunfeld_data()

# t-REC test (constant only)
res <- xtrec(dat, var = "invest", panel_id = "firm",
             time_id = "year", trend = 0L, robust = FALSE)
print(res)

# t-RREC test (with linear trend, robust)
res2 <- xtrec(dat, var = "invest", panel_id = "firm",
              time_id = "year", trend = 1L, robust = TRUE)
summary(res2)

Reference

Westerlund, J. (2015). The effect of recursive detrending on panel unit root tests. Journal of Econometrics, 185(2), 453–467. https://doi.org/10.1016/j.jeconom.2014.06.015

Author

Muhammad Alkhalaf muhammedalkhalaf@gmail.com