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Estimation of average local-to-unity roots in heterogenous panels

  • Erik Hjalmarsson

This paper considers the estimation of average autoregressive roots-near-unity in panels where the time-series have heterogenous local-to-unity parameters. The pooled estimator is shown to have a potentially severe bias and a robust median based procedure is proposed instead. This median estimator has a small asymptotic bias that can be eliminated almost completely by a bias correction procedure. The asymptotic normality of the estimator is proved. The methods proposed in the paper provide a useful way of summarizing the persistence in a panel data set, as well as a complement to more traditional panel unit root tests.

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File URL: http://www.federalreserve.gov/pubs/ifdp/2006/852/default.htm
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File URL: http://www.federalreserve.gov/pubs/ifdp/2006/852/ifdp852.pdf
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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 852.

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Date of creation: 2005
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Handle: RePEc:fip:fedgif:852
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  1. Hyungsik R. Moon & Peter C.B. Phillips, 1999. "Maximum Likelihood Estimation in Panels with Incidental Trends," Cowles Foundation Discussion Papers 1246, Cowles Foundation for Research in Economics, Yale University.
  2. Hyungsik Roger Moon & Benoit Perron & Peter C.B. Phillips, 2003. "Incidental Trends and the Power of Panel Unit Root Tests," Cowles Foundation Discussion Papers 1435, Cowles Foundation for Research in Economics, Yale University.
  3. Hyungsik Roger MOON & Benoit PERRON, 2002. "Testing For A Unit Root In Panels With Dynamic Factors," Cahiers de recherche 18-2002, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  4. Moon, Hyungsik R. & Phillips, Peter C.B., 1999. "Estimation of Autoregressive Roots near Unity using Panel Data," University of California at Santa Barbara, Economics Working Paper Series qt7fd8x80m, Department of Economics, UC Santa Barbara.
  5. Hyungsik Roger Moon & Peter C.B. Phillips, 2003. "GMM Estimation of Autoregressive Roots Near Unity with Panel Data," Cowles Foundation Discussion Papers 1390, Cowles Foundation for Research in Economics, Yale University.
  6. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
  7. Quah, D., 1993. "Exploiting Cross Section Variation for Unit Root Inference in Dynamic Data," Papers 549, Stockholm - International Economic Studies.
  8. Campbell, John & Yogo, Motohiro, 2006. "Efficient tests of stock return predictability," Scholarly Articles 3122601, Harvard University Department of Economics.
  9. Peter C.B. Phillips & Hyungsik R. Moon & Zhijie Xiao, 1998. "How to Estimate Autoregressive Roots Near Unity," Cowles Foundation Discussion Papers 1191, Cowles Foundation for Research in Economics, Yale University.
  10. Cavanagh, Christopher L. & Elliott, Graham & Stock, James H., 1995. "Inference in Models with Nearly Integrated Regressors," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1131-1147, October.
  11. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
  12. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
  13. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  14. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier.
  15. repec:cup:etheor:v:11:y:1995:i:5:p:1131-47 is not listed on IDEAS
  16. 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.
  17. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
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