Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 380: Myths and Facts about Panel Unit Root Tests

Joakim Westerlund () and Jörg Breitung
Additional contact information
Joakim Westerlund: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Jörg Breitung: University of Bonn, Postal: Germany

Abstract: This paper points to some of the common myths and facts that have emerged from 20 years of research into the analysis of unit roots in panel data. Some of these are wellknown, others are not. But they all have in common that if ignored the effects can be very serious. This is demonstrated using both simulations and theoretical reasoning.

Keywords: Non-stationary panel data; Unit root tests; Cross-section dependence; Multidimensional limits

JEL-codes: C13; C33

43 pages, September 11, 2009

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