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More powerful panel data unit root tests with an application to mean reversion in real exchange rates

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  • L. Vanessa Smith

    (Cambridge Endowment for Research in Finance, Judge Institute of Management, University of Cambridge, UK)

  • Stephen Leybourne

    (School of Economics, University of Nottingham, UK)

  • Tae-Hwan Kim

    (School of Economics, University of Nottingham, UK)

  • Paul Newbold

    (School of Economics, University of Nottingham, UK)

Abstract

Unit root tests, seeking mean or trend reversion, are frequently applied to panel data. We show that more powerful variants of commonly applied tests are readily available. Moreover, power gains persist when the modifications are applied to bootstrap procedures that may be employed when cross-correlation of a rather general sort among individual panel members is suspected. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • L. Vanessa Smith & Stephen Leybourne & Tae-Hwan Kim & Paul Newbold, 2004. "More powerful panel data unit root tests with an application to mean reversion in real exchange rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 147-170.
  • Handle: RePEc:jae:japmet:v:19:y:2004:i:2:p:147-170
    DOI: 10.1002/jae.723
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    References listed on IDEAS

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