Econometric Analysis II Friday October 2 01:37:52 2020 Page 1

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Statistics/Data Analysis

User: Pulak Mishra

Project: Unit Root Test

1 . drop time lngdp_con aps lnaps

2 . generate time=(1)+_n-1 Generating 'time' variable

3 . tsset time, yearly Setting the data as time-series

time variable: time, 1 to 57
delta: 1 year

4 . twoway (line gdp_con time) Plot of 'gdp_con' (GDP at constant price) against time - exponential trend (Graph 1)

5 . generate lngdp_con=ln( gdp_con) Natural logarithm of gdp_con - 'lngdp_con'

6 . twoway (line lngdp_con time) Plot of lngdp_con against time - linear trend with intercept (Graph 2)

7 . varsoc lngdp_con Selection of lag length of lngdp_con

Selection-order criteria
Sample: 5 - 57 Number of obs = 53

lag LL LR df p FPE AIC HQIC SBIC

0 -54.5864 .476983 2.0976 2.11189 2.13477

1 113.342 335.86 1 0.000 .000877 -4.20158 -4.17299 -4.12723
2 115.444 4.2046* 1 0.040 .000841* -4.24318* -4.20029* -4.13165* Optimum lag length
3 116.219 1.5497 1 0.213 .000848 -4.23468 -4.1775 -4.08598
4 116.234 .02916 1 0.864 .000881 -4.1975 -4.12602 -4.01162

Endogenous: lngdp_con
Exogenous: _cons

8 . dfuller lngdp_con, trend regress lags(0) DF test of unit root of lngdp_con with trend and drift

Dickey-Fuller test for unit root Number of obs = 56

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) 0.188 -4.137 -3.494 -3.176 Presence of unit root

MacKinnon approximate p-value for Z(t) = 0.9957

D.lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. .0087464 .0466119 0.19 0.852 -.0847453 .1022381
_trend .0003221 .002 0.16 0.873 -.0036893 .0043336
_cons -.0808597 .5676482 -0.14 0.887 -1.219418 1.057698

9 . dfuller lngdp_con, trend regress lags(2) ADF test of unit root of lngdp_con with trend and drift

Augmented Dickey-Fuller test for unit root Number of obs = 54

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) 1.254 -4.141 -3.496 -3.178 Presence of unit root

MacKinnon approximate p-value for Z(t) = 1.0000

 Econometric Analysis II Friday October 2 01:37:53 2020 Page 2

D.lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. .0651269 .0519466 1.25 0.216 -.0392637 .1695175
LD. -.3765547 .1540297 -2.44 0.018 -.6860889 -.0670205
L2D. -.2079839 .1494188 -1.39 0.170 -.5082523 .0922845
_trend -.0017526 .0021877 -0.80 0.427 -.006149 .0026437
_cons -.7507407 .6290486 -1.19 0.238 -2.014861 .5133798

10 . pperron lngdp_con, trend regress PP test of unit root of lngdp_con with trend and drift: Newey-West lag selection
criteria
Phillips-Perron test for unit root Number of obs = 56
Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) 1.903 -25.904 -19.908 -16.884

Z(t) 0.993 -4.137 -3.494 -3.176 Presence of unit root

MacKinnon approximate p-value for Z(t) = 1.0000

lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. 1.008746 .0466119 21.64 0.000 .9152547 1.102238
_trend .0003221 .002 0.16 0.873 -.0036893 .0043336
_cons -.0808597 .5676482 -0.14 0.887 -1.219418 1.057698

11 . pperron lngdp_con, lags(2) trend regress

PP test of unit root of lngdp_con with trend and drift: Information criteria
for lag selection
Phillips-Perron test for unit root Number of obs = 56
Newey-West lags = 2

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) 1.778 -25.904 -19.908 -16.884

Z(t) 0.897 -4.137 -3.494 -3.176 Presence of unit root

MacKinnon approximate p-value for Z(t) = 1.0000

lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. 1.008746 .0466119 21.64 0.000 .9152547 1.102238
_trend .0003221 .002 0.16 0.873 -.0036893 .0043336
_cons -.0808597 .5676482 -0.14 0.887 -1.219418 1.057698
 Econometric Analysis II Friday October 2 01:37:53 2020 Page 3

12 . dfgls lngdp_con, maxlag(2) DF-GLS test of unit root of lngdp_con with trend and drift: Information criteria for lag
selection
DF-GLS for lngdp_con Number of obs = 54

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

2 0.091 -3.743 -3.112 -2.816

1 0.145 -3.743 -3.145 -2.846 Presence of unit root

Opt Lag (Ng-Perron seq t) = 0 [use maxlag(0)]

Min SC = -6.829083 at lag 1 with RMSE .0305494
Min MAIC = -6.938912 at lag 1 with RMSE .0305494

13 . dfgls lngdp_con DF-GLS test of unit root of lngdp_con with trend and drift: Schwert criteria for maxlag length

DF-GLS for lngdp_con Number of obs = 46

Maxlag = 10 chosen by Schwert criterion

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

10 -1.702 -3.743 -2.701 -2.414

9 -1.468 -3.743 -2.754 -2.470
8 -1.251 -3.743 -2.812 -2.528 Presence of unit root
7 -0.678 -3.743 -2.871 -2.587
6 -0.391 -3.743 -2.931 -2.645
5 -0.154 -3.743 -2.991 -2.702
4 -0.027 -3.743 -3.048 -2.756
3 -0.131 -3.743 -3.101 -2.805
2 0.158 -3.743 -3.148 -2.849
1 0.149 -3.743 -3.189 -2.886 Presence of unit root

Opt Lag (Ng-Perron seq t) = 8 with RMSE .0255024

Min SC = -6.760807 at lag 1 with RMSE .0313157
Min MAIC = -6.882696 at lag 1 with RMSE .0313157

14 . generate aps= save_h/ gdp_cur Generating new variable - 'aps' (average propensity to save)
15 . twoway (line aps time) Plot of 'aps' against time - increasing trend with fluctuations (Graph 3)

16 . generate lnaps=ln( aps) Natural logarithm of aps - 'lnaps'

17 . twoway (line lnaps time) Plot of 'lnaps' against time - increasing trend with fluctuations (Graph 4)

18 . varsoc lnaps Selection of lag length for lnaps

Selection-order criteria
Sample: 5 - 57 Number of obs = 53

lag LL LR df p FPE AIC HQIC SBIC

0 -30.3102 .190833 1.18152 1.19581 1.21869

1 39.9094 140.44 1 0.000 .014004 -1.43054 -1.40195 -1.35619
2 40.0306 .24249 1 0.622 .014478 -1.39738 -1.35449 -1.28586
3 43.9015 7.7418* 1 0.005 .012993* -1.50572* -1.44854* -1.35702* Optimum lag length
4 43.9472 .09124 1 0.763 .013474 -1.4697 -1.39822 -1.28383

Endogenous: lnaps
Exogenous: _cons
 Econometric Analysis II Friday October 2 01:37:54 2020 Page 4

19 . dfuller lnaps, trend regress lags(0) DF test of unit root of lnaps with trend and drift

Dickey-Fuller test for unit root Number of obs = 56

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -4.389 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 0.0023 No unit root (at 1 percent significance level) - stationary series

D.lnaps Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnaps
L1. -.534121 .1217015 -4.39 0.000 -.7782234 -.2900186
_trend .0147474 .0034717 4.25 0.000 .0077841 .0217106
_cons -1.509179 .3511948 -4.30 0.000 -2.213586 -.804771

20 . dfuller lnaps, trend regress lags(3) ADF test of unit root of lnaps with trend and drift

Augmented Dickey-Fuller test for unit root Number of obs = 53

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -3.747 -4.143 -3.497 -3.178

MacKinnon approximate p-value for Z(t) = 0.0195 No unit root (at 5 percent significance level) - stationary series

D.lnaps Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnaps
L1. -.692485 .1848183 -3.75 0.000 -1.064291 -.3206785
LD. .315087 .1761112 1.79 0.080 -.0392031 .6693772
L2D. -.040907 .1499053 -0.27 0.786 -.3424775 .2606635
L3D. .1764617 .1391399 1.27 0.211 -.1034517 .4563751
_trend .018605 .0051718 3.60 0.001 .0082006 .0290094
_cons -1.957399 .5394094 -3.63 0.001 -3.042551 -.8722477

21 . pperron lnaps, trend regress PP test of unit root of lnaps with trend and drift: Newey-West lag selection criteria

Phillips-Perron test for unit root Number of obs = 56

Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) -29.343 -25.904 -19.908 -16.884

Z(t) -4.360 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 0.0025 No unit root (at 1 percent significance level) - stationary series
 Econometric Analysis II Friday October 2 01:37:54 2020 Page 5

lnaps Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnaps
L1. .465879 .1217015 3.83 0.000 .2217766 .7099814
_trend .0147474 .0034717 4.25 0.000 .0077841 .0217106
_cons -1.509179 .3511948 -4.30 0.000 -2.213586 -.804771

22 . pperron lnaps, lags(3) trend regress PP test of unit root of lnaps with trend and drift: Information criteria

Phillips-Perron test for unit root Number of obs = 56

Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) -29.343 -25.904 -19.908 -16.884

Z(t) -4.360 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 0.0025 No unit root (at 1 percent significance level) - stationary series

lnaps Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnaps
L1. .465879 .1217015 3.83 0.000 .2217766 .7099814
_trend .0147474 .0034717 4.25 0.000 .0077841 .0217106
_cons -1.509179 .3511948 -4.30 0.000 -2.213586 -.804771

23 . dfgls lnaps, maxlag(3) ers DF-GLS test of unit root of lnaps with trend and drift: Information criteria

DF-GLS for lnaps Number of obs = 53

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

3 -3.855 -3.743 -3.168 -2.869

2 -3.630 -3.743 -3.168 -2.869
-4.803 -3.743 -3.168 -2.869
No unit root
1

Opt Lag (Ng-Perron seq t) = 1 with RMSE .095818 No unit root (at 1/5 percent significance level) - stationary series
Min SC = -4.540787 at lag 1 with RMSE .095818
Min MAIC = -3.630784 at lag 2 with RMSE .095208

24 . dfgls lnaps DF-GLS test of unit root of lnaps with trend and drift: Schwert criteria for lag length

DF-GLS for lnaps Number of obs = 46

Maxlag = 10 chosen by Schwert criterion

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

10 -1.855 -3.743 -2.701 -2.414

9 -1.834 -3.743 -2.754 -2.470
8 -2.502 -3.743 -2.812 -2.528
7 -3.921 -3.743 -2.871 -2.587
6 -3.092 -3.743 -2.931 -2.645
5 -3.153 -3.743 -2.991 -2.702
4 -3.394 -3.743 -3.048 -2.756
3 -3.120 -3.743 -3.101 -2.805
2 -2.890 -3.743 -3.148 -2.849
1 -3.763 -3.743 -3.189 -2.886

Opt Lag (Ng-Perron seq t) = 7 with RMSE .0747268 No unit root (at 1/10 percent significance level) - stationary series
 Econometric Analysis II Friday October 2 01:37:55 2020 Page 6

Min SC = -4.791624 at lag 1 with RMSE .0838234

Min MAIC = -4.227629 at lag 2 with RMSE .0830472

25 . generate deflator = gdp_cur/ gdp_con Generating variable deflator (GDP deflator)

26 . generate save-con= save_h/ deflator

invalid syntax
r(198);

27 . generate save_con= save_h/ deflator Generating variable 'save_con' (saving at constant price)

28 . twoway (line save_con time) Plot of 'save_con' against time - exponential trend (Graph 5)

29 . generate lnsave_con=ln( save_con) logarithmic transformation of save_con - 'lnsave_con'

Plot of 'lnsave_con' against time - linear trend (Graph 5a)
30 . varsoc lnsave_con Selection of lag length for lnsave_con

Selection-order criteria
Sample: 5 - 57 Number of obs = 53

lag LL LR df p FPE AIC HQIC SBIC

0 -79.9889 1.24398 3.05619 3.07048 3.09336

1 38.3769 236.73 1 0.000 .014838 -1.37271 -1.34412 -1.29836*
2 38.5978 .44187 1 0.506 .015282 -1.34331 -1.30043 -1.23179
3 41.3526 5.5094* 1 0.019 .014305* -1.40953* -1.35235* -1.26083 Optimum lag length
4 41.796 .88688 1 0.346 .014613 -1.38853 -1.31705 -1.20265

Endogenous: lnsave_con
Exogenous: _cons

31 . dfuller lnsave_con, trend regress lags(0) DF test of unit root of lnsave_con with trend and drift

Dickey-Fuller test for unit root Number of obs = 56

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -3.461 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 0.0437 No unit root (at 5 percent significance level) - stationary series

D.lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnsave_con
L1. -.3801907 .1098402 -3.46 0.001 -.6005022 -.1598792
_trend .0273779 .0077711 3.52 0.001 .011791 .0429648
_cons 3.588889 1.021951 3.51 0.001 1.539115 5.638664

32 . dfuller lnsave_con, trend regress lags(3) ADF test of unit root of lnsave_con with trend and drift

Augmented Dickey-Fuller test for unit root Number of obs = 53

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -2.157 -4.143 -3.497 -3.178

MacKinnon approximate p-value for Z(t) = 0.5143 Presence of unit root - non-stationary series
 Econometric Analysis II Friday October 2 01:37:55 2020 Page 7

D.lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lnsave_con
L1. -.3474527 .1611097 -2.16 0.036 -.6715637 -.0233418
LD. .0771822 .1769877 0.44 0.665 -.2788712 .4332355
L2D. -.1480655 .1569427 -0.94 0.350 -.4637935 .1676626
L3D. .0063329 .1489727 0.04 0.966 -.2933614 .3060273
_trend .0249155 .0112901 2.21 0.032 .0022027 .0476282
_cons 3.295281 1.481789 2.22 0.031 .3143068 6.276256

33 . pperron lngdp_con, trend regress PP test of unit root of lnsave_con with trend and drift: Newey-West criteria for lag
length
Phillips-Perron test for unit root Number of obs = 56
Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) 1.903 -25.904 -19.908 -16.884

Z(t) 0.993 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 1.0000 Presence of unit root - non-stationary series

lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. 1.008746 .0466119 21.64 0.000 .9152547 1.102238
_trend .0003221 .002 0.16 0.873 -.0036893 .0043336
_cons -.0808597 .5676482 -0.14 0.887 -1.219418 1.057698

34 . pperron lngdp_con, lags(3) trend regress PP test of unit root of lnsave_con with trend and drift: Information criteria
for lag selection
Phillips-Perron test for unit root Number of obs = 56
Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) 1.903 -25.904 -19.908 -16.884

Z(t) 0.993 -4.137 -3.494 -3.176

MacKinnon approximate p-value for Z(t) = 1.0000 Presence of unit root - non-stationary series

lngdp_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con
L1. 1.008746 .0466119 21.64 0.000 .9152547 1.102238
_trend .0003221 .002 0.16 0.873 -.0036893 .0043336
_cons -.0808597 .5676482 -0.14 0.887 -1.219418 1.057698
 Econometric Analysis II Friday October 2 01:37:56 2020 Page 8

35 . dfgls gdp_con, maxlag(3) ers DF-GLS test of unit root of lnsave_cons with trend and drift: Information criteria for lag
selection
DF-GLS for gdp_con Number of obs = 53

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

3 -0.231 -3.743 -3.168 -2.869

2 -0.054 -3.743 -3.168 -2.869
1 0.376 -3.743 -3.168 -2.869

Opt Lag (Ng-Perron seq t) = 2 with RMSE 27104.99 Presence of unit root - non-stationary series
Min SC = 20.63968 at lag 2 with RMSE 27104.99
Min MAIC = 20.47533 at lag 3 with RMSE 26364.65

36 . dfgls gdp_con DF-GLS test of unit root of lnsave_cons with trend and drift: Schwert criteria for lag selection

DF-GLS for gdp_con Number of obs = 46

Maxlag = 10 chosen by Schwert criterion

DF-GLS tau 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

10 -0.936 -3.743 -2.701 -2.414

9 -0.904 -3.743 -2.754 -2.470
8 -1.300 -3.743 -2.812 -2.528
7 -1.198 -3.743 -2.871 -2.587
6 -0.887 -3.743 -2.931 -2.645
5 -0.681 -3.743 -2.991 -2.702
4 -0.365 -3.743 -3.048 -2.756
3 -0.396 -3.743 -3.101 -2.805
2 -0.145 -3.743 -3.148 -2.849
1 0.359 -3.743 -3.189 -2.886

Opt Lag (Ng-Perron seq t) = 3 with RMSE 27819.47 Presence of unit root - non-stationary series
Min SC = 20.78441 at lag 2 with RMSE 28777.69
Min MAIC = 20.60655 at lag 3 with RMSE 27819.47

37 . reg lnsave_con lngdp_con Test for cointegration between two non-stationary series - lnsave_con and lngdp_con

Source SS df MS Number of obs = 57

F( 1, 55) = 4402.17
Model 77.1001849 1 77.1001849 Prob > F = 0.0000
Residual .963277274 55 .017514132 R-squared = 0.9877
Adj R-squared = 0.9874
Total 78.0634622 56 1.3939904 Root MSE = .13234

lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con 1.628394 .0245429 66.35 0.000 1.579209 1.677579

_cons -10.50616 .3297599 -31.86 0.000 -11.16702 -9.84531

OLS regression of lnsave_con on lngdp_con

38 . predict u, res Prediction of residual - u
 Econometric Analysis II Friday October 2 01:37:56 2020 Page 9

39 . estat dwatson

Durbin-Watson d-statistic( 2, 57) = .8150855 DW > 0.511 (Critical value at 1 percent suggested
by Sargan and Bhargava)
40 . varsoc u Selection of lag length for u
Rejection of null hypothesis - lnsave_con and lngdp_con are cointegrated
Selection-order criteria
Sample: 5 - 57 Number of obs = 53

lag LL LR df p FPE AIC HQIC SBIC

0 33.5723 .017128 -1.22914 -1.21485 -1.19197

1 43.998 20.851* 1 0.000 .012002* -1.58483* -1.55624* -1.51048*
2 44.7179 1.4399 1 0.230 .012131 -1.57426 -1.53137 -1.46273
3 45.9676 2.4994 1 0.114 .012019 -1.58368 -1.5265 -1.43498
4 46.5664 1.1975 1 0.274 .012206 -1.56854 -1.49706 -1.38267

Endogenous: u
Exogenous: _cons

41 . twoway (line u time) Plot of 'u' against time - fluctuations around the horizontal axis (zero) - Graph 6

42 . dfuller u, regress lags(0) DF test of unit root of u with drift (??)

Dickey-Fuller test for unit root Number of obs = 56

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -3.617 -3.572 -2.925 -2.598

MacKinnon approximate p-value for Z(t) = 0.0054 No unit root (significance at 1 percent level) - stationary series

D.u Coef. Std. Err. t P>|t| [95% Conf. Interval]

u
L1. -.4059453 .1122186 -3.62 0.001 -.63093 -.1809606

_cons -.0008783 .0144588 -0.06 0.952 -.0298664 .0281099

43 . dfuller u, regress lags(1) ADF test of unit root of u with drift (??)
Augmented Dickey-Fuller test for unit root Number of obs = 55

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -3.735 -3.573 -2.926 -2.598

MacKinnon approximate p-value for Z(t) = 0.0037 No unit root (significance - stationary series

D.u Coef. Std. Err. t P>|t| [95% Conf. Interval]

u
L1. -.4705449 .1259928 -3.73 0.000 -.723368 -.2177218
LD. .1273402 .1372496 0.93 0.358 -.1480712 .4027517

_cons .0022327 .0144867 0.15 0.878 -.0268369 .0313023

 Econometric Analysis II Friday October 2 01:37:56 2020 Page 10

44 . pperron u, regress PP test of unit root of u with drift (??): Newey-West criteria for lag length

Phillips-Perron test for unit root Number of obs = 56

Newey-West lags = 3

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) -21.946 -19.008 -13.348 -10.736

Z(t) -3.564 -3.572 -2.925 -2.598

MacKinnon approximate p-value for Z(t) = 0.0065 No unit root - stationary series

u Coef. Std. Err. t P>|t| [95% Conf. Interval]

u
L1. .5940547 .1122186 5.29 0.000 .36907 .8190394

_cons -.0008783 .0144588 -0.06 0.952 -.0298664 .0281099

45 . pperron u, regress lags(1) PP test of unit root of u with drift (??): Information criteria for lag length selection

Phillips-Perron test for unit root Number of obs = 56

Newey-West lags = 1

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(rho) -23.947 -19.008 -13.348 -10.736

Z(t) -3.698 -3.572 -2.925 -2.598

MacKinnon approximate p-value for Z(t) = 0.0041 No unit root - stationary series

u Coef. Std. Err. t P>|t| [95% Conf. Interval]

u
L1. .5940547 .1122186 5.29 0.000 .36907 .8190394

_cons -.0008783 .0144588 -0.06 0.952 -.0298664 .0281099

46 . dfgls u, notrend maxlag(3) DF-GLS test of unit root of u with drift (??): Information criteria for lag length selection

DF-GLS for u Number of obs = 53

DF-GLS mu 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

3 -2.607 -2.617 -2.188 -1.889

2 -2.474 -2.617 -2.210 -1.910
1 -3.509 -2.617 -2.231 -1.929

Opt Lag (Ng-Perron seq t) = 2 with RMSE .1032495 No unit root (at 1/5 percent significance level) - stationary series
Min SC = -4.32893 at lag 1 with RMSE .1065249
Min MAIC = -4.095177 at lag 2 with RMSE .1032495
 Econometric Analysis II Friday October 2 01:37:57 2020 Page 11

47 . dfgls u, notrend maxlag(1) To be ignored

DF-GLS for u Number of obs = 55

DF-GLS mu 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

1 -3.464 -2.617 -2.222 -1.920

48 . dfgls u, notrend maxlag(1) To be ignored

DF-GLS for u Number of obs = 55

DF-GLS mu 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

1 -3.464 -2.617 -2.222 -1.920

49 . dfgls u, notrend DF-GLS test of unit root of u with drift (??): Schwert criteria for lag length selection

DF-GLS for u Number of obs = 46

Maxlag = 10 chosen by Schwert criterion

DF-GLS mu 1% Critical 5% Critical 10% Critical

[lags] Test Statistic Value Value Value

10 -0.922 -2.617 -2.038 -1.735

9 -0.834 -2.617 -2.054 -1.755
8 -1.150 -2.617 -2.075 -1.778
7 -1.767 -2.617 -2.100 -1.805
6 -1.581 -2.617 -2.128 -1.833
5 -1.683 -2.617 -2.157 -1.862
4 -1.960 -2.617 -2.187 -1.890
3 -2.000 -2.617 -2.216 -1.918
2 -1.777 -2.617 -2.243 -1.943
1 -2.621 -2.617 -2.267 -1.965

Opt Lag (Ng-Perron seq t) = 8 with RMSE .081157 Presence of unit root - non-stationary series
Min SC = -4.588458 at lag 2 with RMSE .0890038
Min MAIC = -4.612384 at lag 9 with RMSE .0783415

50 .Most of the tests (except DF-GLS with Schwert criteria) suggest that u does not have unit root and hence it is stationary. This implies
that 'lnsave_con' and 'lngdp_con' are cointegrated indicating a long run relationship between the two. The Durbin-Watson d statistic
also suggests that these two variables are cointegrated. The conclusions are consistent across the two tests (ADF and DW) of
cointegration.