The Performance of Panel Unit Root and Stationarity Tests: Results from a Large Scale Simulation Study

Hlouskova, Jaroslava and Wagner, Martin (2006) The Performance of Panel Unit Root and Stationarity Tests: Results from a Large Scale Simulation Study. Econometric Reviews, 25 (1), pp. 85-116.

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Abstract or Table of Contents

This paper presents results on the size and power of first generation panel unit root and stationarity tests obtained from a large scale simulation study. The tests developed in the following papers are included: Levin et al. (2002), Harris and Tzavalis (1999), Breitung (2000), Im et al. (1997 2003), Maddala and Wu (1999), Hadri (2000), and Hadri and Larsson (2005). Our simulation set-up is designed to address inter alia the following issues. First, we assess the performance as a function of the time and the cross-section dimensions. Second, we analyze the impact of serial correlation introduced by positive MA roots, known to have detrimental impact on time series unit root tests, on the performance. Third, we investigate the power of the panel unit root tests (and the size of the stationarity tests) for a variety of first order autoregressive coefficients. Fourth, we consider both of the two usual specifications of deterministic variables in the unit root literature.

Item Type: Article in Academic Journal
Keywords: Panel stationarity test, Panel unit root test, Power, Simulation study, Size
Classification Codes (e.g. JEL): C12, C15, C23
Status: Published
Date Deposited: 22 May 2015 08:48
Last Modified: 01 Apr 2016 14:19
URI: http://irihs.ihs.ac.at/id/eprint/3385

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