Recently I have received several comments on my previous blogs of ARDL in microfit & ARDL in eviews 9 regarding the procedure for applying the ARDL with cointegrating bounds of Pesaran in STATA. It is expected as STATA is more under practice software in the research community. Today I will show how to do ARDL in STATA.
First of all we require the ARDL module for STATA, for this write following command“findit ARDL” in STATA command window it will show the link for the ARDL module, click it and install in your STATA.
Following is the command “ardl depvar indepvar1 indepvar2 … , aic” here aic is used to automatic lag selection using Akike Information Criterion Method. Following are the results.
I have matched the results with the ARDL of eviews, they are about 90% similar the slight difference is because the fact that both software packages use a different method to calculate standard errors. Following is the command “ardl, noctable btest” this will show the ARDL bound test and critical values. As expected the critical values are same as what is shown in the eviews but the bound test is slightly larger in eviews it is 5.43 here it is 5.62 hence we can say that there are more chances that you will find cointegration in STATA.
Now you need the long run and short run coefficients it can be estimated through “ardl
depvar indepvar1 indepvar2 … , aic ec regstore(ecreg)”
Here ec will be used to generate the error correction version of the model with aic as the criterion for the lag order. The important thing is the use of restore(name) command, it will be explained later.
Here you can see the LR is the long run estimates, SR is the short run estimates and ADJ is the adjustment coefficient or the error correction coefficients. Now for the case to generate the post estimation diagnostics you need to convert the ardl estimated results to the reg format so that we can apply post estimations.
For this write the command “estimates restore ecreg” it will bring the result of the ardl ecm model into the memory of the computer. And when you write the “regress” command it will show the ecm results under regress command like below
Here you can use following commands
“estat dwatson” for the Durbin – Watson D statistics for 1st order autocorrelation.
“estat archlm” for the ARCH LM test for higher order autocorrelation
“estat bgodfrey” for the Breusch Godfrey LM test for higher order autocorrelation
“estat hettest” for Breusch Pagan Heteroscedasticity test.
“estat ovtest” for Ramsey RESET test
“estat vif” for VIF test of Multicollinearity
For all these tests the decision criterion is available in the form of null or alternative hypothesis. Up-til now I am looking how to check the stability of the coefficient (CUSUM) test in STATA. Any one who knows how to do it please share. Hope this helps.
Update: cusum6 command can be used to generate CUSUM and CUSUMsq charts for ARDL in Stata