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Determining the Stationarity Properties of Individual Series in Panel Datasets

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Abstract

An attractive feature of panel unit root tests is the ability to exploit coefficient homogeneity under the null hypothesis of a unit root for all series in order to obtain a more powerful test of the unit root hypothesis. However, under the alternative hypothesis of heterogeneous panel unit root tests of at least one series being stationary, the researcher is left with little idea of how to proceed. In other words if we reject the unit root hypothesis we do not know which series caused the rejection. We propose a method that enables the distinction of a set of series into a group of stationary and a group of nonstationary series. We discuss its theoretical properties and investigate its small sample performance in a Monte Carlo study.

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  • George Kapetanios, 2003. "Determining the Stationarity Properties of Individual Series in Panel Datasets," Working Papers 495, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp495
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp495.pdf
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    1. MacKinnon, James G. & Smith Jr., Anthony A., 1998. "Approximate bias correction in econometrics," Journal of Econometrics, Elsevier, vol. 85(2), pages 205-230, August.
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    1. repec:nea:journl:y:2017:i:35:p:71-102 is not listed on IDEAS
    2. Smeekes Stephan, 2011. "Bootstrap Sequential Tests to Determine the Stationary Units in a Panel," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. George Kapetanios, 2003. "Determining the Poolability of Individual Series in Panel Datasets," Working Papers 499, Queen Mary University of London, School of Economics and Finance.
    4. Giuseppe Cavaliere & Dimitris N. Politis & Anders Rahbek & Stephan Smeekes, 2015. "Recent developments in bootstrap methods for dependent data," Journal of Time Series Analysis, Wiley Blackwell, vol. 36(3), pages 398-415, May.

    More about this item

    Keywords

    Panel unit root tests; Sequential testing;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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