A Simple Panel-CADF Test for Unit Roots
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...| Link(s) zu Dokument(en): | IHS Publikation |
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| Hauptverfasser: | , |
| Format: | IHS Series NonPeerReviewed |
| Sprache: | Englisch |
| Veröffentlicht: |
Institut für Höhere Studien
2011
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| Zusammenfassung: | 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.; |
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