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

Research output: Contribution to journalArticlepeer-review

Authors

Colleges, School and Institutes

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.

Details

Original languageEnglish
Pages (from-to)83-87
JournalEconomics Letters
Volume124
Issue number1
Early online date5 May 2014
Publication statusPublished - 1 Jul 2014

Keywords

  • Panel unit root, Local power function, Serial correlation, Incidental trends