Scandinavian Working Papers in Economics
Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
No 327: Testing for Panel Unit Roots under General Cross-Sectional Dependence
Thomas Holgersson (), Kristofer Månsson () and Ghazi Shukur ()
Additional contact information
Thomas Holgersson: Jönköping International Business School, and Linnaeus University, Postal: Department of Economics, Finance and Statistics , Jönköping International Business School, , Box 1026, , 55 111 Sweden
Kristofer Månsson: Jönköping International Business School, Postal: Department of Economics, Finance and Statistics , Jönköping International Business School, , Box 1026, , 55 111 Sweden
Ghazi Shukur: Jönköping International Business School, and Linnaeus University, Postal: Department of Economics, Finance and Statistics , Jönköping International Business School, , Box 1026, , 55 111 Sweden
Abstract: In this paper we generalize four tests of multivariate linear hypothesis to panel data unit root testing. The test statistics are invariant to certain linear transformations of data and therefore simulated critical values may conveniently be used. It is demonstrated that all four tests remains well behaved in cases of where there are heterogeneous alternatives and cross-correlations between marginal variables. A Monte Carlo simulation is included to compare and contrast the tests with two well-established ones.
Keywords: panel data; unit roots; linear hypothesis; invariance
19 pages, October 21, 2013
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