Scandinavian Working Papers in Economics
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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 327:
Testing for Panel Unit Roots under General Cross-Sectional Dependence

Thomas Holgersson (), Kristofer Månsson () and Ghazi Shukur ()

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; (follow links to similar papers)

JEL-Codes: C32; C52; (follow links to similar papers)

19 pages, October 21, 2013

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