Advanced Search
MyIDEAS: Login

Using GMM when testing for a unit root in panels where the time-series dimension is fixed

Contents:

Author Info

  • Edith Madsen

    (Institute of Economics, University of Copenhagen)

Registered author(s):

    Abstract

    In this paper we investigate GMM-based unit root inference in an autoregressive panel data model with individual-specific levels. We consider tests based on GMM estimators of the AR parameter and moment condition tests. The limiting distributions of the corresponding test statistics are derived when the AR parameter is unity and local-to-unity. This provides information about which statistics lead to valid test procedures. The performance of the valid tests in terms of their local power can then be compared. The results show that the GMM estimator of the AR parameter based on the Arellano-Bover type moment conditions, expressing that lagged differences are used as instruments for the equations in levels, can be used to detect a unit root. On the other hand, the widely used GMM estimator of the AR parameter based on the Arellano-Bond type moment conditions, expressing that lagged levels are used as instruments for the equations in first-differences, can not be used for this purpose. Instead a moment condition test of the hypothesis that the Arellano-Bond type moment conditions do not identify the AR parameter is valid as a unit root test. Finally, a simulation study demonstrates that the local power of the tests provides good approximations of their actual power in finite samples.

    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.econ.ku.dk/cam/wp0910/wp0203/2003-11.pdf/
    Download Restriction: no

    Bibliographic Info

    Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2003-11.

    as in new window
    Length: 38 pages
    Date of creation: Aug 2003
    Date of revision:
    Handle: RePEc:kud:kuieca:2003_11

    Contact details of provider:
    Postal: Ă˜ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
    Phone: (45) 35 32 30 74
    Fax: +45 35 32 30 00
    Email:
    Web page: http://www.econ.ku.dk/CAM/
    More information through EDIRC

    Related research

    Keywords: dynamic panel data model; unit roots; GMM estimation; local alternatives; weak instruments;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    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:kud:kuieca:2003_11. 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: (Thomas Hoffmann).

    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.