Testing for unit roots in three-dimensional heterogeneous panels in the presence of cross-sectional dependence
This paper extends the cross-sectionally augmented IPS (CIPS) test of Pesaran (2006) to a three-dimensional (3D) panel. This 3D-CIPS test is correctly sized in the presence of cross-sectional dependency. Comparing its power performance to that of a bootstrapped IPS (BIPS) test, we find that the BIPS test invariably dominates, although for high levels of cross-sectional dependency the 3D-CIPS test can out-perform the BIPS test.
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"A Simple Panel Unit Root Test in the Presence of Cross Section Dependence,"
Cambridge Working Papers in Economics
0346, Faculty of Economics, University of Cambridge.
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"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
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