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Panel Unit Root Tests and Spatial Dependence

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  • BALTAGI B-H
  • BRESSON G.
  • PIROTTE A.

Abstract

This paper studies the performance of panel unit root tests when spatial effects are present that account for cross-section correlation. Monte Carlo simulations show that there can be considerable size distortions in panel unit root tests when the true specification exhibits spatial error correlation. These tests are applied to a panel data set on net real income from the 1000 largest French communes observed over the period 1985-1998. Copyright © 2007 John Wiley & Sons, Ltd.
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Suggested Citation

  • Baltagi B-H & Bresson G. & Pirotte A., 2005. "Panel Unit Root Tests and Spatial Dependence," Working Papers ERMES 0503, ERMES, University Paris 2.
    • Handle: RePEc:erm:papers:0503
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    File URL: http://ermes.u-paris2.fr/doctrav/0503
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    as
    1. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-533, May.
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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