Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 384: Testing for Unit Roots in Panel Time Series Models with Multiple Breaks
Joakim Westerlund ()
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Joakim Westerlund: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: This paper proposes two new unit root tests that are appropriate in the presence of an unknown number of structural breaks. One is based on a single time series and the other is based on a panel of multiple series. For the estimation of the number of breaks and their locations, a simple procedure based on outlier detection is proposed. The limiting distributions of the tests are derived and evaluated in small samples using simulation experiments. The implementation of the tests is illustrated using as an example purchasing power parity.
Keywords: Unit root test; Structural break; Outlier detection; Common factor; Purchasing power parity
30 pages, September 29, 2009
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