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Breaking the panels: An application to the GDP per capita

  • Josep Llu�s Carrion-i-Silvestre
  • Tom�s del Barrio-Castro
  • Enrique L�pez-Bazo

This paper proposes a test statistic for the null hypothesis of panel stationarity that allows for the presence of multiple structural breaks. Two different specifications are considered depending on the structural breaks affecting the individual effects and/or the time trend. The model is flexible enough to allow the number of breaks and their position to differ across individuals. The test is shown to have a standard normal limit distribution with a good finite sample performance. It is applied to typical panel data of real per capita GDP in a set of OECD countries. Copyright 2005 Royal Economic Society

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1368-423X.2005.00158.x
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Article provided by Royal Economic Society in its journal The Econometrics Journal.

Volume (Year): 8 (2005)
Issue (Month): 2 (07)
Pages: 159-175

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Handle: RePEc:ect:emjrnl:v:8:y:2005:i:2:p:159-175
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  2. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
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  7. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  9. repec:cup:etheor:v:11:y:1995:i:2:p:359-68 is not listed on IDEAS
  10. Ben-David, Dan & Papell, David H., 1995. "The great wars, the great crash, and steady state growth: Some new evidence about an old stylized fact," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 453-475, December.
  11. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  12. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  13. McCoskey, Suzanne K. & Selden, Thomas M., 1998. "Health care expenditures and GDP: panel data unit root test results," Journal of Health Economics, Elsevier, vol. 17(3), pages 369-376, June.
  14. Josep Lluís Carrion-i-Silvestre & Tomás del Barrio-Castro & Enrique López-Bazo, 2002. "Level shifts in a panel data based unit root test. An application to the rate of unemployment," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C5-2, International Conferences on Panel Data.
  15. Kormendi, Roger C & Meguire, Philip, 1990. "A Multicountry Characterization of the Nonstationarity of Aggregate Output," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(1), pages 77-93, February.
  16. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
  17. 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.
  18. Chihwa Kao & Suzanne McCoskey, 1997. "A Residual-Based Test Of The Null Of Cointegration In Panel Data," Econometrics 9711002, EconWPA.
  19. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-87, August.
  20. Junsoo Lee & Mark Strazicich, 2001. "Testing the null of stationarity in the presence of a structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 377-382.
  21. Fabio Busetti & Andrew Harvey, 2007. "Testing for trend," Temi di discussione (Economic working papers) 614, Bank of Italy, Economic Research and International Relations Area.
  22. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
  23. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  24. Alan Bartley, William & Lee, Junsoo & Strazicich, Mark C., 2001. "Testing the null of cointegration in the presence of a structural break," Economics Letters, Elsevier, vol. 73(3), pages 315-323, December.
  25. Kurozumi, Eiji, 2002. "Testing for stationarity with a break," Journal of Econometrics, Elsevier, vol. 108(1), pages 63-99, May.
  26. Amsler, Christine & Lee, Junsoo, 1995. "An LM Test for a Unit Root in the Presence of a Structural Change," Econometric Theory, Cambridge University Press, vol. 11(02), pages 359-368, February.
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