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Identifying I(0) Series in Macro-panels: Are Sequential Panel Selection Methods Useful?

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  • Costantini, Mauro
  • Lupi, Claudio

Abstract

Sequential panel selection methods (spsms) are based on the repeated application of panel unit root tests and are increasingly used to identify I (0) time series in macro- panels. We check the reliability of spsms by using Monte Carlo simulations based on generating the individual test statistics and the p values to be combined into panel unit root tests, both under the unit root null and under selected local alternatives. The analysis is carried out considering both independent and dependent test statistics. We show that spsms do not possess better classification performances than conventional univariate tests.

Suggested Citation

  • Costantini, Mauro & Lupi, Claudio, 2014. "Identifying I(0) Series in Macro-panels: Are Sequential Panel Selection Methods Useful?," Economics & Statistics Discussion Papers esdp14073, University of Molise, Department of Economics.
    • Handle: RePEc:mol:ecsdps:esdp14073
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    References listed on IDEAS

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    1. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
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    4. Hanck, Christoph, 2008. "The Error-in-Rejection Probability of meta-analytic panel tests," Economics Letters, Elsevier, vol. 101(1), pages 27-30, October.
    5. Mauro Costantini & Claudio Lupi, 2013. "A Simple Panel-CADF Test for Unit Roots," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(2), pages 276-296, April.
    6. Chortareas, Georgios & Kapetanios, George, 2009. "Getting PPP right: Identifying mean-reverting real exchange rates in panels," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 390-404, February.
    7. Matei Demetrescu & Uwe Hassler & Adina‐Ioana Tarcolea, 2006. "Combining Significance of Correlated Statistics with Application to Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 647-663, October.
    8. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
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    Cited by:

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    2. Tolga Omay & Ayşegül Çorakcı & Furkan Emirmahmutoglu, 2017. "Real interest rates: nonlinearity and structural breaks," Empirical Economics, Springer, vol. 52(1), pages 283-307, February.
    3. Bontempi, Maria Elena & Bottazzi, Laura & Golinelli, Roberto, 2020. "A multilevel index of heterogeneous short-term and long-term debt dynamics," Journal of Corporate Finance, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Unit root; Panel data; ROC curve; Simulation;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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