A Simple Panel-CADF Test for Unit Roots

Costantini, Mauro and Lupi, Claudio (January 2011) A Simple Panel-CADF Test for Unit Roots. IHS Economics Series 261

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Abstract: In this paper we propose a simple extension to the panel case of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed in Hansen (1995). The extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the test is easy to compute, has good size properties and gives power gains with respect to other popular panel approaches. A procedure to compute the asymptotic p-values of Hansen's CADF test is also a side-contribution of the paper. We also complement Hansen (1995) and Caporale and Pittis (1999) with some new theoretical results . Two empirical applications are carried out for illustration purposes on international data to test the PPP hypothesis and the presence of a unit root in international industrial production indices.;

Item Type: IHS Series
Keywords: 'Unit root' 'Panel data' 'Approximate P-values' 'Monte Carlo'
Classification Codes (e.g. JEL): C22, C23, F31
Status: Published
Date Deposited: 26 Sep 2014 10:39
Last Modified: 25 Jul 2017 17:15
URI: http://irihs.ihs.ac.at/id/eprint/2035

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