Hi Anonymous

There are different methods to select lags in unit roots tests, the two you
mention are not fundamentally wrong, and belong to the standard methods
used, even if the IC selection is maybe now the prefered solution. Note
there is some work from Perron and Ng with a refined selection criterion
with better properties, unfortunately it hasn't been implemented in R as
far as I know.

You are not mentioning the package you use (nor the code?), I guess you use
urca? In this case, you could extract AIC/BIC with:

library(urca)
data(nporg)
gnp <- na.omit(nporg[, "gnp.r"])
za.gnp <- ur.za(gnp, model="both", lag=2)
summary(za.gnp)

logLik.ur.za <- function(object,...) logLik(object@testreg) ## necessary as
AIC not directly implemented
AIC(za.gnp)

Best

Matthieu





>I was wondering if anyone could help with choosing optimal lag length for
ZA
>test.
>
>There have been two lag order selection methods commonly used in the
>literature:
>
>1) The ZA paper recommends to run the test with maximum number of lags.
Then
>the lag order is reduced sequentially until the longest lag is
statistically
>significant;
>
>2) One could also use AIC or SBC or other criteria to choose lag order.
>
>I am using annual series with 22 observations. Which of the above lag order
>selection procedures would be correct to apply?

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