Small sample properties of CIPS panel unit root test under conditional and unconditional heteroskedasticity
This paper used Monte Carlo simulations to analyze the small sample properties of cross-sectionally augmented panel unit root test (CIPS test). We considered situations involving two types of time-series heteroskedasticity (unconditional and ARCH) in the unobserved common factor and idiosyncratic error term. We found that the CIPS test could be extremely robust versus the two types of heteroskedasticity in the unobserved common factor. However, we found under-size distortion in the case of unconditional heteroskedasticity in the idiosyncratic error term, and conversely, over-size distortion in the case of ARCH. Furthermore, we observed a tendency for its over-size distortion to moderate with low volatility persistence in the ARCH process and exaggerate with high volatility persistence.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jushan Bai & Serena Ng, 2001.
"A PANIC Attack on Unit Roots and Cointegration,"
Boston College Working Papers in Economics
519, Boston College Department of Economics.
- Hyungsik Roger MOON & Benoit PERRON, 2002.
"Testing For A Unit Root In Panels With Dynamic Factors,"
Cahiers de recherche
18-2002, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Moon, H.R.Hyungsik Roger & Perron, Benoit, 2004. "Testing for a unit root in panels with dynamic factors," Journal of Econometrics, Elsevier, vol. 122(1), pages 81-126, September.
- MOON, Hyungsik Roger & PERRON, Benoit., 2002. "Testing for a Unit Root in Panels with Dynamic Factors," Cahiers de recherche 2002-18, Universite de Montreal, Departement de sciences economiques.
- 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, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- HASHIGUCHI, Yoshihiro & HAMORI, Shigeyuki, 2010.
"The sustainability of trade balances in Sub-Saharan Africa: panel cointegration tests with cross-section dependence,"
24054, University Library of Munich, Germany.
- Yoshihiro Hashiguchi & Shigeyuki Hamori, 2012. "The sustainability of trade balances in sub-Saharan Africa: panel cointegration tests with cross-section dependence," Applied Economics Letters, Taylor & Francis Journals, vol. 19(2), pages 161-165, February.
- Taner Yigit, 2002.
"Shortfalls of Panel Unit Root Testing,"
0208, Department of Economics, Bilkent University.
- M. Hashem Pesaran, 2004.
"Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure,"
CESifo Working Paper Series
1331, CESifo Group Munich.
- M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, 07.
- repec:ebl:ecbull:v:3:y:2008:i:16:p:1-13 is not listed on IDEAS
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- S. de Silva & K. Hadri & A. R. Tremayne, 2009. "Panel unit root tests in the presence of cross-sectional dependence: finite sample performance and an application," Econometrics Journal, Royal Economic Society, vol. 12(2), pages 340-366, 07.
- M. Hashem Pesaran, 2007.
"A simple panel unit root test in the presence of cross-section dependence,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
- Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
- Hamori, Shigeyuki & Tokihisa, Akira, 1997. "Testing for a unit root in the presence of a variance shift1," Economics Letters, Elsevier, vol. 57(3), pages 245-253, December.
- Kim, Kiwhan & Schmidt, Peter, 1993. "Unit root tests with conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 59(3), pages 287-300, October.
- Peter C. B. Phillips & Donggyu Sul, 2003. "Dynamic panel estimation and homogeneity testing under cross section dependence *," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 217-259, 06.
- 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, vol. 61(0), pages 631-52, Special I.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-12-00334. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If references are entirely missing, you can add them using this form.