Working Papers, Department of Economics, Lund University
Pooled Unit Root Tests in Panels with a Common Factor
Abstract: This paper proposes new pooled panel unit root tests that
are appropriate when the data exhibit cross-sectional dependence that is
generated by a single common factor. Using sequential limit arguments, we
show that the tests have a limiting normal distribution that is free of
nuisance parameters and that they are unbiased against heterogenous local
alternatives. Our Monte Carlo results indicate that the tests perform well
in comparison to other popular tests that also presumes a common factor
structure for the cross-sectional dependence.
Keywords: Pooled Unit Root Tests; Panel Data; Common Factor; Cross-Sectional Dependence; Monte Carlo Simulation.; (follow links to similar papers)
JEL-Codes: C12; C31; C33; (follow links to similar papers)
26 pages, January 26, 2005
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to David Edgerton ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom