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Testing for stationarity in heterogeneous panel data where the time dimension is finite

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  • Kaddour Hadri
  • Rolf Larsson

Abstract

and hence makes the test valid for any (T, N) combination. The asymptotic distributions of the tests are derived under the null and are shown to be normally distributed. Their moments for T fixed are derived analytically using Ghazal's (1994, Statistics and Probability letters 20, 313--319) 1 lemma 1. Finite sample size and power are considered in a Monte Carlo experiment. The proposed tests have empirical sizes that are very close to the nominal 5% level. The Monte Carlo results clearly show that the power of the test statistics increases substantially with N, T and ω (ω being the number of unit root processes under the alternative). The results indicate that the assumption that T is asymptotic rather than fixed leads to tests that are substantially oversized particularly for relatively short panels with large N. Copyright 2005 Royal Economic Society

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Bibliographic Info

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

Volume (Year): 8 (2005)
Issue (Month): 1 (03)
Pages: 55-69

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Handle: RePEc:ect:emjrnl:v:8:y:2005:i:1:p:55-69

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Cited by:
  1. Rubin, Amir, 2007. "Ownership level, ownership concentration and liquidity," Journal of Financial Markets, Elsevier, vol. 10(3), pages 219-248, August.
  2. Kaddour Hadri & Yao Rao, 2006. "Panel Stationarity Test with Structural Breaks," Research Papers 200615, University of Liverpool Management School.
  3. Luis Eduardo Arango & Luis Fernando Melo, . "Determinantes de la elección de administradora de pensiones: primeras estimaciones a partir de agregados," Borradores de Economia 383, Banco de la Republica de Colombia.
  4. Rabah Arezki & Kaddour Hadri & Prakash Loungani & Yao Rao, 2013. "Testing the Prebisch-Singer Hypothesis since 1650," IMF Working Papers 13/180, International Monetary Fund.
  5. Ana María Iregui B. & Luis Fernando Melo V. & María Teresa Ramírez G., . "Productividad Regional y Sectorial en Colombia: Análisis utilizando datos de panel," Borradores de Economia 378, Banco de la Republica de Colombia.
  6. Jesús Otero & Luis Fernando Gamboa & Andrés García-Suaza, 2011. "An analysis of the relationship between wages in the public and private sector in colombia: a panel data approach," DOCUMENTOS DE TRABAJO 008738, UNIVERSIDAD DEL ROSARIO.
  7. Muhammad M. Shahbaz & Samia S. Nasreen & Chong Hui C.H. Ling & Rashid Sbia, 2014. "Causality between trade openness and energy consumption: What causes what in high, middle and low income countries," ULB Institutional Repository 2013/168714, ULB -- Universite Libre de Bruxelles.
  8. Beck, Roland & Kamps, Annette, 2009. "Petrodollars and imports of oil exporting countries," Working Paper Series 1012, European Central Bank.
  9. Hadri, Kaddour & Kurozumi, Eiji, 2012. "A simple panel stationarity test in the presence of serial correlation and a common factor," Economics Letters, Elsevier, vol. 115(1), pages 31-34.
  10. Ana Iregui & Jesús Otero, 2011. "Testing the law of one price in food markets: evidence for Colombia using disaggregated data," Empirical Economics, Springer, vol. 40(2), pages 269-284, April.
  11. Etienne B. Yehoue & Gilles J. Dufrénot, 2005. "Real Exchange Rate Misalignment," IMF Working Papers 05/164, International Monetary Fund.
  12. Maeso-Fernandez, Francisco & Osbat, Chiara & Schnatz, Bernd, 2006. "Towards the estimation of equilibrium exchange rates for transition economies: Methodological issues and a panel cointegration perspective," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 499-517, September.
  13. Hadri, Kaddour & Kurozumi, Eiji, 2008. "A Simple Panel Stationarity Test in the Presence of Cross-Sectional Dependence," CCES Discussion Paper Series 7, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  14. Kristian Jönsson, 2008. "Choosing Between Panel Data Stationarity Tests," Economics Bulletin, AccessEcon, vol. 3(25), pages 1-8.
  15. 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.
  16. Kristian Jönsson, 2008. "The accuracy of normal approximation in a heterogeneous panel data unit root test," Statistical Papers, Springer, vol. 49(3), pages 565-579, July.
  17. repec:ebl:ecbull:v:3:y:2008:i:25:p:1-8 is not listed on IDEAS

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