Unit root inference in panel data models where the time-series dimension is fixed: a comparison of different tests
AbstractThe objective of the paper is to investigate and compare the performance of some of the unit root tests in micropanels, which have been suggested in the literature. The framework is a first-order autoregressive panel data model allowing for heterogeneity in the intercept but not in the autoregressive parameter. The tests are all based on usual t-statistics corresponding to least squares estimators of the autoregressive parameter resulting from different transformations of the observed variables. The performance of the tests is investigated and compared by deriving the local power of the tests when the autoregressive parameter is local-to-unity. The results show that the assumption concerning the initial values is extremely important in this matter. The outcome of a simulation experiment demonstrates that the local power of the tests provides a good approximation to their actual power in finite samples. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2010.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal Econometrics Journal.
Volume (Year): 13 (2010)
Issue (Month): 1 (02)
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- Yiannis Karavias & Elias Tzavalis, .
"The power performance of fixed-T panel unit root tests allowing for structural breaks,"
13/01, University of Nottingham, Granger Centre for Time Series Econometrics.
- 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.
- Robertson, Donald & Sarafidis, Vasilis & Westerlund, Joakim, 2014. "GMM Unit Root Inference in Generally Trending and Cross-Correlated Dynamic Panels," MPRA Paper 53419, University Library of Munich, Germany.
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2012-05, University of Connecticut, Department of Economics, revised Oct 2012.
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- Giorgio Canarella & Stephen M. Miller & Mahmoud M. Nourayi, 2012. "Firm Profitability: Mean-Reverting or Random-Walk Behavior?," Working Papers 1202, University of Nevada, Las Vegas , Department of Economics.
- 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.
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