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Structural changes, common stochastic trends and unit roots in panel data

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  • Jushan Bai; Josep Lluís Carrion-i-Silvestre

Abstract

In this paper we propose a new test statistic that considers multiple structural breaks to analyse the non-stationarity of a panel data set. The methodology is based on the common factor analysis in an attempt to allow for some sort of dependence across the individuals. Thus allowing for multiple structural breaks in the †Panel Analysis of Non-stationarity in Idiosyncratic and Common components†(PANIC) methodology increases the degree of heterogeneity when assessing the stochastic properties of the panel data set

Suggested Citation

  • Jushan Bai; Josep Lluís Carrion-i-Silvestre, 2004. "Structural changes, common stochastic trends and unit roots in panel data," Econometric Society 2004 North American Summer Meetings 345, Econometric Society.
  • Handle: RePEc:ecm:nasm04:345
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    References listed on IDEAS

    as
    1. Josep Lluis Carrion Silvestre & Tomas del Barrio Castro & Enrique Lopez Bazo, 2002. "Level shifts in a panel data based unit root test. An application to the rate of unemployment," Working Papers in Economics 79, Universitat de Barcelona. Espai de Recerca en Economia.
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    3. 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.
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    8. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, pages 355-385.
    9. Jushan Bai & Serena Ng, 2004. "A PANIC Attack on Unit Roots and Cointegration," Econometrica, Econometric Society, vol. 72(4), pages 1127-1177, July.
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    12. Josep Lluís Carrion-i-Silvestre & Tomás del Barrio-Castro & Enrique López-Bazo, 2005. "Breaking the panels: An application to the GDP per capita," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 159-175, July.
    13. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
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    More about this item

    Keywords

    multiple structural breaks; common factors; panel data unit root tests; principal components;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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