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The power envelope of panel unit root tests in case stationary alternatives offset explosive ones

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  • Becheri, I. Gaia
  • Drost, Feike C.
  • van den Akker, Ramon
  • Wichert, Oliver

Abstract

We derive the power envelope for panel unit root tests where heterogeneous alternatives are modeled via zero-expectation random perturbations. We obtain an asymptotically UMP test and discuss how to proceed when one is agnostic about the expectation of the perturbations.

Suggested Citation

  • Becheri, I. Gaia & Drost, Feike C. & van den Akker, Ramon & Wichert, Oliver, 2016. "The power envelope of panel unit root tests in case stationary alternatives offset explosive ones," Statistics & Probability Letters, Elsevier, vol. 108(C), pages 1-8.
    • Handle: RePEc:eee:stapro:v:108:y:2016:i:c:p:1-8
    DOI: 10.1016/j.spl.2015.09.019
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    References listed on IDEAS

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    1. Vaart,A. W. van der, 2000. "Asymptotic Statistics," Cambridge Books, Cambridge University Press, number 9780521784504.
    2. Moon, Hyungsik Roger & Perron, Benoit & Phillips, Peter C.B., 2007. "Incidental trends and the power of panel unit root tests," Journal of Econometrics, Elsevier, vol. 141(2), pages 416-459, December.
    3. Gaia Becheri, I. & Drost, Feike C. & Akker, Ramon van den, 2015. "Asymptotically Ump Panel Unit Root Tests—The Effect Of Heterogeneity In The Alternatives," Econometric Theory, Cambridge University Press, vol. 31(3), pages 539-559, June.
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    Cited by:

    1. Skrobotov, Anton (Скроботов, Антон) & Turuntseva, Marina (Турунцева, Марина), 2017. "Testing the Hypothesis of a Unit Root for Independent Panels [Тестирование Гипотезы О Наличии Единичного Корня Для Независимых Панелей]," Working Papers 021707, Russian Presidential Academy of National Economy and Public Administration.

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