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Testing for stationarity in heterogeneous panel data in the presence of cross section dependence

  • Giulietti, Monica

    (Aston Business School, University of Aston)

  • Otero, Jesus

    (Facultad de Economia, Columbia)

  • Smith, Jeremy

    (Department of Economics, University of Warwick)

The panel variant of the KPSS tests developed by Hadri (2000) for the null of stationarity suffers from size distortions in the presence of cross section dependence. However, applying the bootstrap methodology we find that these tests are approximately correctly sized.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2006/twerp_758.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 758.

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Length: 9 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:758
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  1. 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.
  2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  3. Yoosoon Chang, 2000. "Bootstrap Unit Root Tests in Panels with Cross-Sectional Dependency," Cowles Foundation Discussion Papers 1251, Cowles Foundation for Research in Economics, Yale University.
  4. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  5. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  6. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February.
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