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Beyond Panel Unit Root Tests: Using Multiple Testing to Determine the Non Stationarity Properties of Individual Series in a Panel

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  • Hyungsik Roger Moon
  • Benoit Perron

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Abstract

Most panel unit root tests are designed to test the joint null hypothesis of a unit root for each individual series in a panel. After a rejection, it will often be of interest to identify which series can be deemed to be stationary and which series can be deemed nonstationary. Researchers will sometimes carry out this classi.cation on the basis of n individual (univariate) unit root tests based on some ad hoc significance level. In this paper, we suggest and demonstrate how to use the false discovery rate (FDR) in evaluating I (1) = I (0) classifications

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2011s-17.

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Date of creation: 01 Feb 2011
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Handle: RePEc:cir:cirwor:2011s-17

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Keywords: False discovery rate; multiple testing; unit root tests; panel data.;

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  1. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  2. John D. Storey & Jonathan E. Taylor & David Siegmund, 2004. "Strong control, conservative point estimation and simultaneous conservative consistency of false discovery rates: a unified approach," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 66(1), pages 187-205.
  3. Lopez, Claude & Murray, Christian J & Papell, David H, 2005. "State of the Art Unit Root Tests and Purchasing Power Parity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 361-69, April.
  4. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
  5. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
  6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  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. Benoit Perron & Hyungsik Roger Moon, 2007. "An empirical analysis of nonstationarity in a panel of interest rates with factors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 383-400.
  9. Palm, Franz C. & Smeekes, Stephan & Urbain, Jean-Pierre, 2008. "Cross-Sectional Dependence Robust Block Bootstrap Panel Unit Root Tests," Research Memorandum 048, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  10. Christoph Hanck, 2009. "For which countries did PPP hold? A multiple testing approach," Empirical Economics, Springer, vol. 37(1), pages 93-103, September.
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Cited by:
  1. Smeekes Stephan, 2011. "Bootstrap Sequential Tests to Determine the Stationary Units in a Panel," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. Pesaran, M. Hashem, 2012. "On the interpretation of panel unit root tests," Economics Letters, Elsevier, vol. 116(3), pages 545-546.

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