A fixed-T version of Breitung’s panel data unit root test

Yiannis Karavias; Elias Tzavalis

doi:10.1016/j.econlet.2014.04.029

A fixed-T version of Breitung’s panel data unit root test

Yiannis Karavias, Elias Tzavalis

Economics

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4 Citations (Scopus)

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Abstract

We extend Breitung’s (2000) panel data unit root test to the case of fixed time (T) dimension while still allowing for heteroscedastic and serially correlated error terms. The analytic local power function of the new test is derived assuming that only the cross section dimension of the panel grows large. It is found that, if the errors are serially correlated, the test has non-trivial power. Monte Carlo experiments show that the suggested test is more powerful when the number of cross section units is moderate or large, regardless of the number of time series observations.

Original language	English
Pages (from-to)	83-87
Journal	Economics Letters
Volume	124
Issue number	1
Early online date	5 May 2014
DOIs	https://doi.org/10.1016/j.econlet.2014.04.029
Publication status	Published - 1 Jul 2014

Keywords

Panel unit root
Local power function
Serial correlation
Incidental trends

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10.1016/j.econlet.2014.04.029

Karavias 2014
Checked for eligibility: 21/10/2015. NOTICE: this is the author’s version of a work that was accepted for publication in Economics Letters . Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters [Volume 124, Issue 1, (July 2014)] DOI:doi:10.1016/j.econlet.2014.04.029
Accepted author manuscript, 171 KBLicence: None: All rights reserved

http://www.sciencedirect.com/science/article/pii/S0165176514001578

Cite this

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abstract = "We extend Breitung{\textquoteright}s (2000) panel data unit root test to the case of fixed time (T) dimension while still allowing for heteroscedastic and serially correlated error terms. The analytic local power function of the new test is derived assuming that only the cross section dimension of the panel grows large. It is found that, if the errors are serially correlated, the test has non-trivial power. Monte Carlo experiments show that the suggested test is more powerful when the number of cross section units is moderate or large, regardless of the number of time series observations.",

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AU - Tzavalis, Elias

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N2 - We extend Breitung’s (2000) panel data unit root test to the case of fixed time (T) dimension while still allowing for heteroscedastic and serially correlated error terms. The analytic local power function of the new test is derived assuming that only the cross section dimension of the panel grows large. It is found that, if the errors are serially correlated, the test has non-trivial power. Monte Carlo experiments show that the suggested test is more powerful when the number of cross section units is moderate or large, regardless of the number of time series observations.

AB - We extend Breitung’s (2000) panel data unit root test to the case of fixed time (T) dimension while still allowing for heteroscedastic and serially correlated error terms. The analytic local power function of the new test is derived assuming that only the cross section dimension of the panel grows large. It is found that, if the errors are serially correlated, the test has non-trivial power. Monte Carlo experiments show that the suggested test is more powerful when the number of cross section units is moderate or large, regardless of the number of time series observations.

KW - Panel unit root

KW - Local power function

KW - Serial correlation

KW - Incidental trends

U2 - 10.1016/j.econlet.2014.04.029

DO - 10.1016/j.econlet.2014.04.029

M3 - Article

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VL - 124

SP - 83

EP - 87

JO - Economics Letters

JF - Economics Letters

IS - 1

ER -

A fixed-T version of Breitung’s panel data unit root test

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Keywords

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