Advanced Search
MyIDEAS: Login to save this article or follow this journal

Time-specific disturbances and cross-sectional dependency in a small-sample heterogeneous panel data unit root test

Contents:

Author Info

  • Kristian Jonsson

Abstract

In their seminal work, Im et al. (1997, 2003) suggested that time series for several cross-sectional units could be used to increase the power of the Dickey--Fuller unit root test. They argued that when cross-sectional correlation is a problem that can be modelled by a time-specific factor, demeaning across the cross-sectional units can solve the problem. In this study, this proposition is proven valid, but it is also shown that previously supplied standardizing moments are inappropriate when the number of cross-sections are small, causing size to differ from the significance level. To correct this size distortion, the current paper supplies response surface parameters that can be used to obtain moments that are valid when a time-specific factor suffices for modelling cross-sectional correlation in the heterogeneous panel data unit root framework. The correct size of the panel data unit root test comes at the cost of a somewhat lower power against a stationary alternative.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500397671
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 11 ()
Pages: 1309-1317

as in new window
Handle: RePEc:taf:applec:v:38:y:2006:i:11:p:1309-1317

Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20

Order Information:
Web: http://www.tandfonline.com/pricing/journal/RAEC20

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jörg Breitung & Samarjit Das, 2005. "Panel unit root tests under cross-sectional dependence," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 59(4), pages 414-433.
  2. Yoosoon Chang, 2000. "Bootstrap Unit Root Tests in Panels with Cross-Sectional Dependency," Econometric Society World Congress 2000 Contributed Papers 1585, Econometric Society.
  3. Mark Holmes, 2002. "Panel data evidence on inflation convergence in the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 9(3), pages 155-158.
  4. Tomas del Barrio & Josep Ll Carrion & Enrique Lopez-Bazo, 2003. "Evidence on the Purchasing Power Parity in Panel of Cities," ERSA conference papers ersa03p273, European Regional Science Association.
  5. Taner Yigit, 2002. "Shortfalls of Panel Unit Root Testing," Departmental Working Papers 0208, Bilkent University, Department of Economics.
  6. Jönsson, Kristian, 2004. "Testing for Stationarity in Panel Data Models when Disturbances are Cross-Sectionally Correlated," Working Papers 2004:17, Lund University, Department of Economics, revised 26 Nov 2004.
  7. Danny Quah, 1993. "Exploiting Cross Section Variation for Unit Root Inference in Dynamic Data," FMG Discussion Papers dp171, Financial Markets Group.
  8. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:11:p:1309-1317. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.