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Time-specific disturbances in a panel stationarity test

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  • Kristian Jonsson

Abstract

In this article, we investigate the performance of a panel data stationarity test when cross-sectional correlation is modelled by a time-specific factor. Size distortions, that occur especially when the number of cross sections is small, are documented. To eliminate these distortions, a new set of critical values is supplied. When investigating the rejection frequency under the alternative hypothesis, it is found that the panel data stationarity test that uses the supplied critical values maintain good power characteristics even when only a subset of the cross-sectional units have a unit root.

Suggested Citation

  • Kristian Jonsson, 2009. "Time-specific disturbances in a panel stationarity test," Applied Economics, Taylor & Francis Journals, vol. 43(7), pages 845-853.
    • Handle: RePEc:taf:applec:v:43:y:2009:i:7:p:845-853
    DOI: 10.1080/00036840802599958
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    References listed on IDEAS

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    1. Jönsson, Kristian, 2004. "Testing for Stationarity in Panel Data Models when Disturbances are Cross-Sectionally Correlated," Working Papers 2004:17, Lund University, Department of Economics, revised 26 Nov 2004.
    2. Jönsson, Kristian, 2005. "Testing for Stationarity in Panel Data when Errors are Serially Correlated. Finite-Sample Results," Working Papers 2005:16, Lund University, Department of Economics.
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