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A simple nonstationary-volatility robust panel unit root test

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  • Demetrescu, Matei
  • Hanck, Christoph

Abstract

We propose an IV panel unit root test robust to nonstationary error volatility. Its finite-sample performance is convincing even for many units and strong cross-correlation. An application to GDP prices illustrates the inferential impact of nonstationary volatility.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 1 ()
Pages: 10-13

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:10-13

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: I(1) series; Time-varying volatility; Cross-dependent panel; Nonlinear IV;

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References

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  1. Ledoit, Olivier & Wolf, Michael, 2004. "A well-conditioned estimator for large-dimensional covariance matrices," Journal of Multivariate Analysis, Elsevier, vol. 88(2), pages 365-411, February.
  2. Hamori, Shigeyuki & Tokihisa, Akira, 1997. "Testing for a unit root in the presence of a variance shift1," Economics Letters, Elsevier, vol. 57(3), pages 245-253, December.
  3. So, Beong Soo & Shin, Dong Wan, 1999. "Cauchy Estimators For Autoregressive Processes With Applications To Unit Root Tests And Confidence Intervals," Econometric Theory, Cambridge University Press, vol. 15(02), pages 165-176, April.
  4. Shin, Dong Wan & Kang, Seungho, 2006. "An instrumental variable approach for panel unit root tests under cross-sectional dependence," Journal of Econometrics, Elsevier, vol. 134(1), pages 215-234, September.
  5. 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.
  6. Hanck, Christoph, 2008. "The Error-in-Rejection Probability of meta-analytic panel tests," Economics Letters, Elsevier, vol. 101(1), pages 27-30, October.
  7. Moon, H.R.Hyungsik Roger & Perron, Benoit, 2004. "Testing for a unit root in panels with dynamic factors," Journal of Econometrics, Elsevier, vol. 122(1), pages 81-126, September.
  8. Jönsson, Kristian, 2003. "Cross-sectional dependency and size distortion in a small-sample homogeneous panel-data unit root test," Working Papers 2003:10, Lund University, Department of Economics.
  9. Samarjit Das & Joerg Breitung, 2004. "Panel Unit Root Tests under Cross- sectional Dependence," Econometric Society 2004 North American Summer Meetings 55, Econometric Society.
  10. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Olivier Ledoit & Michael Wolf, 2013. "Spectrum estimation: a unified framework for covariance matrix estimation and PCA in large dimensions," ECON - Working Papers 105, Department of Economics - University of Zurich, revised Jul 2013.

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