Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties
Resource
Journal of Econometrics,108,1-24.
Journal
Journal of Econometrics
Pages
1
Date Issued
2002-08
Date
2002-08
Author(s)
Abstract
We consider pooling cross-section time series data for testing the unit root hypothesis. The degree of persistence in individual regression error, the intercept and trend coefficient are allowed to vary freely across individuals. As both the cross-section and time series dimensions of the panel grow large, the pooled t-statistic has a limiting normal distribution that depends on the regression specification but is free from nuisance parameters. Monte Carlo simulations indicate that the asymptotic results provide a good approximation to the test statistics in panels of moderate size, and that the power of the panel-based unit root test is dramatically higher, compared to performing a separate unit root test for each individual time series. © 2002 Elsevier Science B.V. All rights reserved.
Type
journal article