A long memory panel unit root test: PPP revisited
AbstractIn this paper two techniques, long memory and panel data models, are combined in order to increase the power of unit root tests. The power is shown to be always better against fractional alternatives and usually against autoregressive alternatives. The test is then used to reanalyze data sets investigated by Cheung and Lai (1993), Oh (1996) and Papell (1997) who studied the purchasing power parity. In some cases, the test rejected the hypothesis of no cointegration between foreign and domestic prices where the other authors tests did not.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 303.
Length: 14 pages
Date of creation: 12 Feb 1999
Date of revision:
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Unit root; Long memory; Purchasing power parity;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-02-15 (All new papers)
- NEP-ECM-1999-02-22 (Econometrics)
- NEP-ETS-1999-02-15 (Econometric Time Series)
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- Kristian Jönsson, 2005.
"Cross-sectional Dependency and Size Distortion in a Small-sample Homogeneous Panel Data Unit Root Test,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 67(3), pages 369-392, 06.
- 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.
- Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers 16, Center for Policy Research, Maxwell School, Syracuse University.
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