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CIPS test for Unit Root in Panel Data: further Monte Carlo results

Author

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  • Andrea Cerasa

    () (University "La Sapienza" of Rome)

Abstract

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.

Suggested Citation

  • Andrea Cerasa, 2008. "CIPS test for Unit Root in Panel Data: further Monte Carlo results," Economics Bulletin, AccessEcon, vol. 3(16), pages 1-13.
  • Handle: RePEc:ebl:ecbull:eb-07c20091
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    References listed on IDEAS

    as
    1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters,in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
    2. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    3. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-1069, July.
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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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