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A Panel-CADF Test for Unit Roots

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  • Costantini, Mauro

    ()

  • Lupi, Claudio

    ()

  • Popp, Stephan

    ()

Abstract

In this paper we propose the extension of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed by Hansen (1995} to the panel case. We show that the extension is viable and gives power gains with respect to the time series approach. Particular attention is paid to cross-unit dependence.

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File URL: http://web.unimol.it/progetti/repec/mol/ecsdps/ESDP07039.pdf
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Bibliographic Info

Paper provided by University of Molise, Dept. EGSeI in its series Economics & Statistics Discussion Papers with number esdp07039.

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Length: 23 pages
Date of creation: 10 Sep 2007
Date of revision:
Handle: RePEc:mol:ecsdps:esdp07039

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Keywords: Unit root; Panel data; Cross-unit dependence;

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References

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  1. Caporale, Guglielmo Maria & Pittis, Nikitas, 1999. " Unit Root Testing Using Covariates: Some Theory and Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(4), pages 583-95, November.
  2. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9526, Faculty of Economics, University of Cambridge.
  3. Quah, D., 1993. "Exploiting Cross Section Variation for Unit Root Inference in Dynamic Data," Papers, Stockholm - International Economic Studies 549, Stockholm - International Economic Studies.
  4. Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 16, Center for Policy Research, Maxwell School, Syracuse University.
  5. Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers, Princeton, Department of Economics - Econometric Research Program 360, Princeton, Department of Economics - Econometric Research Program.
  6. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  7. Matei Demetrescu & Uwe Hassler & Adina-Ioana Tarcolea, 2006. "Combining Significance of Correlated Statistics with Application to Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 68(5), pages 647-663, October.
  8. Hansen, Bruce E., 1995. "Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(05), pages 1148-1171, October.
  9. Abadir, K.M. & Magnus, J.R., 2001. "Notation in Econometrics: A Proposal for a Standard," Discussion Paper, Tilburg University, Center for Economic Research 2001-8, Tilburg University, Center for Economic Research.
  10. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers, Queen's University, Department of Economics 918, Queen's University, Department of Economics.
  11. Chang, Yoosoon & Song, Wonho, 2005. "Unit Root Tests for Panels in the Presence of Short-run and Long-run Dependencies: Nonlinear IV Approach with Fixed N and Large T," Working Papers, Rice University, Department of Economics 2002-06, Rice University, Department of Economics.
  12. 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, Elsevier, vol. 108(1), pages 1-24, May.
  13. Banerjee, Anindya & Massimiliano Marcellino & Chiara Osbat, 2002. "Testing for PPP: Should We Use Panel Methods?," Royal Economic Society Annual Conference 2002, Royal Economic Society 13, Royal Economic Society.
  14. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(2), pages 249-272, April.
  15. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, Elsevier, vol. 44(1), pages 1-19, February.
  16. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
  17. repec:cup:etheor:v:11:y:1995:i:5:p:1148-71 is not listed on IDEAS
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Citations

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Cited by:
  1. Costantini, Mauro & Lupi, Claudio, 2011. "A Simple Panel-CADF Test for Unit Roots," Economics & Statistics Discussion Papers, University of Molise, Dept. EGSeI esdp11062, University of Molise, Dept. EGSeI.
  2. Claudio Lupi, . "Unit Root CADF Testing with R," Journal of Statistical Software, American Statistical Association, American Statistical Association, vol. 32(i02).
  3. Lupi, Claudio, 2009. "Covariate Augmented Dickey-Fuller Tests with R," Economics & Statistics Discussion Papers, University of Molise, Dept. EGSeI esdp09051, University of Molise, Dept. EGSeI.

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