Scandinavian Working Papers in Economics

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

No 383: Testing for a Unit Root in a Random Coefficient Panel Data Model

Joakim Westerlund () and Rolf Larsson
Additional contact information
Joakim Westerlund: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Rolf Larsson: Uppsala University

Abstract: This paper proposes a new unit root test in the context of a random autoregressive coefficient panel data model, in which the null of a unit root corresponds to the joint restriction that the autoregressive coefficient has unit mean and zero variance. The asymptotic distribution of the test statistic is derived and simulation results are provided to suggest that it performs very well in small samples.

Keywords: Panel unit root test; Random coefficient autoregressive model

JEL-codes: C13; C33

52 pages, October 1, 2009

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