Kristian Jönsson ()
Additional contact information
Kristian Jönsson: Sveriges Riksbank, Postal: Macroprudential Division, Financial Stability Department, Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Abstract: In this paper, we investigate the effects of cross-sectional disturbance correlation on a previously suggested panel data stationarity test. We find that the previously suggested test has a serious size distortion if the disturbances to different cross sections are correlated. We suggest a new panel data test procedure that also tests the null hypothesis of stationarity. However, the test procedure that we suggest is robust against the presence of cross-sectional disturbance correlation, as well as serial correlation. Furthermore, the test has an approximate normal distribution and which makes p-values and critical values easy to obtain. By applying our test to investigate output convergence, we illustrate the adverse effects that can occur when neglecting to account for cross-sectional correlation when testing for stationarity in panel data models.
Keywords: Panel-Data Stationarity; Cross-Sectional Dependence; Output Convergence
25 pages, First version: June 4, 2004. Revised: November 26, 2004.
Full text files
WP04_17 Full text
Questions (including download problems) about the papers in this series should be directed to Iker Arregui Alegria ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:lunewp:2004_017This page generated on 2024-09-18 12:56:51.