IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Dynamic factor extraction of cross-sectional dependence in panel unit root tests

  • George Kapetanios

    (Queen Mary, University of London, London, UK)

Registered author(s):

    Recently, considerable emphasis has been placed on the problems arising out of cross-sectional dependence in panel unit root tests. This paper adopts the factor-based cross-sectional dependence paradigm of Bai and Ng (2005) but suggests alternative factor extraction methods. Some theoretical results for these methods are provided. Further, a detailed Monte Carlo study of these methods for multiple and persistent factors is undertaken. It is found that results are radically different from the serially uncorrelated single-factor case. Tests perform much worse and in some cases it is preferable not to correct at all for cross-sectional dependence. Copyright © 2007 John Wiley & Sons, Ltd.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1002/jae.943
    File Function: Link to full text; subscription required
    Download Restriction: no

    File URL: http://qed.econ.queensu.ca:80/jae/2007-v22.2/
    File Function: Supporting data files and programs
    Download Restriction: no

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

    Volume (Year): 22 (2007)
    Issue (Month): 2 ()
    Pages: 313-338

    as
    in new window

    Handle: RePEc:jae:japmet:v:22:y:2007:i:2:p:313-338
    Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/0883-7252/

    Order Information: Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252 Email:


    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.:

    as in new window
    1. Peter C.B.Phillips & Donggyu Sul, 2002. "Dynamic Panel Estimation and Homogeneity Testing Under Cross Section Dependence," Cowles Foundation Discussion Papers 1362, Cowles Foundation for Research in Economics, Yale University.
    2. MacDonald, Ronald, 1996. "Panel unit root tests and real exchange rates," Economics Letters, Elsevier, vol. 50(1), pages 7-11, January.
    3. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February.
    4. Kapetanios, George, 2004. "A note on modelling core inflation for the UK using a new dynamic factor estimation method and a large disaggregated price index dataset," Economics Letters, Elsevier, vol. 85(1), pages 63-69, October.
    5. Abuaf, Niso & Jorion, Philippe, 1990. " Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 45(1), pages 157-74, March.
    6. George Kapetanios, 2002. "Modelling Core Inflation for the UK Using a New Dynamic Factor Estimation Method and a Large Disaggregated Price Index Dataset," Working Papers 471, Queen Mary University of London, School of Economics and Finance.
    7. Chang, Yoosoon, 2002. "Nonlinear IV unit root tests in panels with cross-sectional dependency," Journal of Econometrics, Elsevier, vol. 110(2), pages 261-292, October.
    8. Samarjit Das & Joerg Breitung, 2004. "Panel Unit Root Tests under Cross- sectional Dependence," Econometric Society 2004 North American Summer Meetings 55, Econometric Society.
    9. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    10. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
    11. 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.
    12. Papell, David H., 1997. "Searching for stationarity: Purchasing power parity under the current float," Journal of International Economics, Elsevier, vol. 43(3-4), pages 313-332, November.
    13. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2004. "The generalised dynamic factor model: consistency and rates," ULB Institutional Repository 2013/10133, ULB -- Universite Libre de Bruxelles.
    14. Forni, Mario & Reichlin, Lucrezia, 1995. "Let's Get Real: A Dynamic Factor Analytical Approach to Disaggregated Business Cycle," CEPR Discussion Papers 1244, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:22:y:2007:i:2:p:313-338. 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: (Wiley-Blackwell Digital Licensing)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.