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Panel Unit Root Test with Nonlinear Mean Reversion and Smooth Breaks

Author

Listed:
  • Lau, Chi Keung Marco
  • Chau, Frankie
  • Deesomsak, Rataporn

Abstract

This paper extends the unit root test of Christopoulos and Leòn-Ledesma (2010) to accommodate not only structural breaks and non-linear mean reversion, but also the contemporaneous cross-sectional dependence commonly found in panel dataset. The proposed test presents good finite sample properties and its applications on four major ASEAN countries’ real exchange rates show that the unit root hypothesis could be rejected, supporting their long-run Purchasing Power Parity (PPP) against the Chinese Yuan.

Suggested Citation

  • Lau, Chi Keung Marco & Chau, Frankie & Deesomsak, Rataporn, 2011. "Panel Unit Root Test with Nonlinear Mean Reversion and Smooth Breaks," MPRA Paper 53602, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53602
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ASEAN countries; PPP; Panel ESTAR; Nonlinear adjustment; Contemporaneous dependence;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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