Unit Root Inference in Generally Trending and Cross-Correlated Fixed-T Panels
(2018) In Journal of Business & Economic Statistics 36(3). p.493-504- Abstract
This article proposes a new panel unit root test based on the generalized method of moments approach for panels with a possibly small number of time periods, T, and a large number of cross-sectional units, N. In the model that we consider the deterministic trend function is essentially unrestricted and the errors obey a multifactor structure that allows for rich forms of unobserved heterogeneity. In spite of these allowances, the GMM estimator considered is shown to be asymptotically unbiased, (Formula presented.)-consistent, and asymptotically normal for all values of the autoregressive (AR) coefficient, ρ, including unity, making it a natural candidate for unit root inference. Results from our Monte Carlo study suggest that the... (More)
This article proposes a new panel unit root test based on the generalized method of moments approach for panels with a possibly small number of time periods, T, and a large number of cross-sectional units, N. In the model that we consider the deterministic trend function is essentially unrestricted and the errors obey a multifactor structure that allows for rich forms of unobserved heterogeneity. In spite of these allowances, the GMM estimator considered is shown to be asymptotically unbiased, (Formula presented.)-consistent, and asymptotically normal for all values of the autoregressive (AR) coefficient, ρ, including unity, making it a natural candidate for unit root inference. Results from our Monte Carlo study suggest that the asymptotic properties are borne out well in small samples. The implementation is illustrated by using a large sample of US banking institutions to test Gibrat’s Law.
(Less)
- author
- Robertson, Donald ; Sarafidis, Vasilis and Westerlund, Joakim LU
- organization
- publishing date
- 2018-07-03
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of Business & Economic Statistics
- volume
- 36
- issue
- 3
- pages
- 493 - 504
- publisher
- American Statistical Association
- external identifiers
-
- scopus:85018162563
- ISSN
- 0735-0015
- DOI
- 10.1080/07350015.2016.1191501
- language
- English
- LU publication?
- yes
- id
- 71e2f1a8-a7ef-4dd3-a0b8-bae6d2de54f6
- date added to LUP
- 2016-05-14 14:23:30
- date last changed
- 2022-03-08 18:36:52
@article{71e2f1a8-a7ef-4dd3-a0b8-bae6d2de54f6,
abstract = {{<p>This article proposes a new panel unit root test based on the generalized method of moments approach for panels with a possibly small number of time periods, T, and a large number of cross-sectional units, N. In the model that we consider the deterministic trend function is essentially unrestricted and the errors obey a multifactor structure that allows for rich forms of unobserved heterogeneity. In spite of these allowances, the GMM estimator considered is shown to be asymptotically unbiased, (Formula presented.)-consistent, and asymptotically normal for all values of the autoregressive (AR) coefficient, ρ, including unity, making it a natural candidate for unit root inference. Results from our Monte Carlo study suggest that the asymptotic properties are borne out well in small samples. The implementation is illustrated by using a large sample of US banking institutions to test Gibrat’s Law.</p>}},
author = {{Robertson, Donald and Sarafidis, Vasilis and Westerlund, Joakim}},
issn = {{0735-0015}},
language = {{eng}},
month = {{07}},
number = {{3}},
pages = {{493--504}},
publisher = {{American Statistical Association}},
series = {{Journal of Business & Economic Statistics}},
title = {{Unit Root Inference in Generally Trending and Cross-Correlated Fixed-T Panels}},
url = {{http://dx.doi.org/10.1080/07350015.2016.1191501}},
doi = {{10.1080/07350015.2016.1191501}},
volume = {{36}},
year = {{2018}},
}