On the Local Power of Fixed T Panel Unit Root Tests with Serially Correlated Errors
AbstractAnalytical asymptotic local power functions are employed to study the effects of general form short term serial correlation on �fixed-T panel data unit root tests. Two models are considered, one that has only individual intercepts and one that has both individual intercepts and individual trends. It is shown that tests based on IV estimators are more powerful in all cases examined. Even more, for the model with individual trends an IV based test is shown to have non-trivial local power at the natural root-N rate.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43131.
Date of creation: Dec 2012
Date of revision:
Panel data models; unit roots; local power functions; serial correlation; incidental trends;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-15 (All new papers)
- NEP-ECM-2012-12-15 (Econometrics)
- NEP-ETS-2012-12-15 (Econometric Time Series)
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