Question

4. What major tests do you use to test for unit roots in time series? (give the names of two tests). What major tests do you use to test for unit roots in panel data? (give the names of three panel unit root tests). 5. Suppose by using the VIF test, you find that there is a multicollinearity in the regression output, which makes most of the independent variables insignificant while the R-squared is high. How do you deal with multicollinearity? States the steps. How do you correct for it in the regression? 6. What statistic do you use to check for the normal distribution? What does the null hypothesis say? Please do not cite the Durbin Watson as this is not a formal test. 7. State at least four out of the five elements that the Introduction section of a research paper should address? 8. How do you cite the following reference in the text of the paper (not in the reference list)? "Shahbaz, M., Khraief, N., Uddin, G.S., and Ozturk, I. (2014). Environmental Kuznets Curve in an Open Economy: A Bounds Testing and Causality Analysis for Tunisia. Renewable and Sustainable Energy Reviews, 34, 325-336."

Answer 1

4. Unit root tests are basically tests for stationarity in time series. One cause for non-stationarity are unit roots. If a time shift does not cause a change in shape of the distribution then,  the time series has stationarity. There are many test exist, two are as follow:

1) Schmidt Phillips Test- it includes coefficients of deterministic variables in null and alternate hypotheses. Subtypes : rho-test and the tau-test

2) Phillips Perron Test- it is a modification of Dickey Fuller test and corrects for hetero scedasticity and  auto correlation in the errors.

The Panel Unit root tests is selected on basis of the type of data set like balanced or unbalanced. Following are the few test for panel unit root:

1) ADF Test: this test is for unbalanced panel data which is sufficient to test the stationarity.

2) Levin-lin-ch test and 3) Breitung test: these tests are for balanced panel data