Solved – How to interpret results from unit root tests with intercept

eviewstime series

Null Hypothesis: LOG_AUSTRIA has a unit root                
Exogenous: Constant             
Lag Length: 1 (Automatic - based on SIC, maxlag=29)             

                                        t-Statistic          Prob.*

Augmented Dickey-Fuller test statistic              1.765602             0.9997
Test critical values:   1% level           -3.432059    
                5% level               -2.862181    
                   10% level           -2.567155    

*MacKinnon (1996) one-sided p-values.               


Augmented Dickey-Fuller Test Equation               
Dependent Variable: D(LOG_AUSTRIA)              
Method: Least Squares               
Date: 07/17/13   Time: 18:55                
Sample (adjusted): 3 3450               
Included observations: 3448 after adjustments               

Variable    Coefficient Std. Error  t-Statistic Prob.  

LOG_AUSTRIA(-1) 0.000659    0.000373    1.765602    0.0776
D(LOG_AUSTRIA(-1))  0.053321    0.017030    3.131112    0.0018
C   -0.003183   0.002040    -1.560515   0.1187

R-squared   0.003923        Mean dependent var      0.000428
Adjusted R-squared  0.003345        S.D. dependent var      0.010612
S.E. of regression  0.010595        Akaike info criterion       -6.256058
Sum squared resid   0.386693        Schwarz criterion       -6.250711
Log likelihood  10788.44        Hannan-Quinn criter.        -6.254148
F-statistic 6.784764        Durbin-Watson stat      2.000233
Prob(F-statistic)   0.001146

Best Answer

For the interpretation of Eviews output, just focus on top part. The lower one shows how the Eviews runs the regression. Eviews runs the regression in first difference form, so the null is coefficient on LOG_AUSTRIA(-1) is zero which means that there is an unit root.The alternate hypothesis is that it is less than zero, i.e., there is no unit root.

Your test statistic 1.765602 is greater than critical value -2.567155 at 10%. So, you accept the null that there is an unit root (see p=0.999). To reject the null at 10 %, p<=0.10 (test statistic should be less than -2.567155), to reject the null at 5% (test statistic should be less than-2.862181) p<=0.05, and to reject the null at 1%,(test statistic should be less than-3.432059) p<=0.01.

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