CIPS test for Unit Root in Panel Data: further Monte Carlo results
This paper analyzes, through Monte Carlo experiments, the behaviour of Pesaran's CIPS test for the null of a unit root in panel data when (i) the assumption of a single common factor in the specification of the cross-section dependence is violated and (ii) the autoregressive order of the residuals is estimated. The simulation analysis points to the single common factor as a fundamental assumption for a suitable behaviour of the CIPS test and suggests that the test delivers the best performance when the truncation lag is estimated as a deterministic function of the sample size.
Volume (Year): 3 (2008)
Issue (Month): 16 ()
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360, Princeton, Department of Economics - Econometric Research Program.
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1350, C.E.P.R. Discussion Papers.
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