Working Papers, Department of Economics, Lund University
Testing for Stationarity in Panel Data when Errors are Serially Correlated. Finite-Sample Results
Abstract: Abstract: In this paper, we study the small sample
properties of the panel data stationarity test of Hadri (2000). We find
that the previously suggested moments, that are to be used when
standardizing the panel data stationarity test, cause size distortions when
samples are small and serial correlation in the disturbance terms is
allowed for. Instead, we supply standardizing moments that are to be used
in a panel data stationarity test when samples are small and serial
correlation in the disturbances may be an issue. We also document a serious
small-sample bias in the panel data stationarity test when a linear trend
is present in the data.
Keywords: Panel Data; Stationarity; Serial Correlation; Monte Carlo Simulation; (follow links to similar papers)
JEL-Codes: C15; C23; C32; C33; (follow links to similar papers)
17 pages, February 18, 2005
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