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Asymptotic local power of pooled t-ratio tests for unit roots in panels with fixed effects

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  • Hyungsik Roger Moon
  • Benoit Perron

Abstract

. This latter test is equivalent to the well-known pooled t test proposed by Levin et al. (2002, Journal of Econometrics 108, 1--24), and its power depends only on the mean of the local-to-unity parameters. This implies that it has the same power against homogeneous and heterogeneous alternatives with the same mean autoregressive parameter. We then compare these tests to a panel version of the Sargan-Bhargava (1983, Econometrica 51, 153--74) statistic for a unit root and the common point-optimal test of Moon et al. (2007, Journal of Econometrics 141, 416--51). Monte Carlo simulations confirm the usefulness of our local-to-unity framework. Copyright Royal Economic Society 2008

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Bibliographic Info

Article provided by Royal Economic Society in its journal Econometrics Journal.

Volume (Year): 11 (2008)
Issue (Month): 1 (03)
Pages: 80-104

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Handle: RePEc:ect:emjrnl:v:11:y:2008:i:1:p:80-104

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Cited by:
  1. Claude Lopez, 2003. "An Improved Panel Unit Root Test Using GLS-Detrending," University of Cincinnati, Economics Working Papers Series, University of Cincinnati, Department of Economics 2003-06, University of Cincinnati, Department of Economics.
  2. Karavias, Yiannis & Tzavalis, Elias, 2013. "The Power Performance of Fixed-T Panel Unit Root Tests allowing for Structural Breaks," MPRA Paper 46012, University Library of Munich, Germany.
  3. Karavias, Yiannis & Tzavalis, Elias, 2014. "Testing for unit roots in short panels allowing for a structural break," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 76(C), pages 391-407.
  4. Chirok Han & Peter C.B. Phillips, 2007. "GMM Estimation for Dynamic Panels with Fixed Effects and Strong Instruments at Unity," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1599, Cowles Foundation for Research in Economics, Yale University.
  5. Moon, Hyungsik Roger & Perron, Benoit & Phillips, Peter C.B., 2007. "Incidental trends and the power of panel unit root tests," Journal of Econometrics, Elsevier, Elsevier, vol. 141(2), pages 416-459, December.
  6. Joakim Westerlund & Johan Blomquist, 2013. "A modified LLC panel unit root test of the PPP hypothesis," Empirical Economics, Springer, Springer, vol. 44(2), pages 833-860, April.
  7. Joakim Westerlund & Mehdi Hosseinkouchack & Martin Solberger, . "The Local Power of the CADF and CIPS Panel Unit Root Tests," Financial Econometics Series, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance 2014_05, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  8. Karavias, Yiannis & Tzavalis, Elias, 2012. "On the Local Power of Fixed T Panel Unit Root Tests with Serially Correlated Errors," MPRA Paper 43131, University Library of Munich, Germany.
  9. Badi H. Baltagi & Georges Bresson & Alain Pirotte, 2006. "Panel Unit Root Tests and Spatial Dependence," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 88, Center for Policy Research, Maxwell School, Syracuse University.
  10. Gutierrez, Luciano, 2009. "Sampling at different frequencies, and the power of panel unit root tests," Economics Letters, Elsevier, vol. 102(1), pages 59-61, January.
  11. Joakim Westerlund, . "On the Importance of the First Observation in GLS Detrending in Unit Root Testing," Financial Econometics Series, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance 2014_07, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  12. Westerlund, Joakim & Larsson, Rolf, 2012. "Testing for a unit root in a random coefficient panel data model," Journal of Econometrics, Elsevier, Elsevier, vol. 167(1), pages 254-273.
  13. Joakim Westerlund & J�rg Breitung, 2013. "Lessons from a Decade of IPS and LLC," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(5-6), pages 547-591, August.
  14. Joakim Westerlund, . "Pooled Panel Unit Root Tests and the Effect of Past Initialization," Financial Econometics Series, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance 2014_06, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  15. Westerlund, Joakim & Larsson, Rolf, 2009. "Testing for a Unit Root in a Random Coefficient Panel Data Model," Working Papers in Economics 383, University of Gothenburg, Department of Economics.

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