Cross-sectional dependency and size distortion in a small-sample homogeneous panel data unit root test
(2005) In Oxford Bulletin of Economics and Statistics 67(3). p.369-392- Abstract
- In this paper, we investigate the effects of cross-sectional disturbance correlation in a homogeneous panel data unit root test. As reported by other authors, the unit root test has incorrect size in the presence of cross-sectional correlation. We suggest that a previously known estimator can be used to reduce the size distortions. We supply response surface estimates for critical values and study the size characteristics of the proposed test. We find that the suggested estimator performs well in small-sample homogeneous panel data unit root tests. The reduction in size distortion comes at a small cost of lower power against a stationary alternative.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/237330
- author
- Jönsson, Kristian LU
- organization
- publishing date
- 2005
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Oxford Bulletin of Economics and Statistics
- volume
- 67
- issue
- 3
- pages
- 369 - 392
- publisher
- Wiley-Blackwell
- external identifiers
-
- wos:000229584200005
- scopus:19844367606
- ISSN
- 1468-0084
- DOI
- 10.1111/j.1468-0084.2005.00124.x
- language
- English
- LU publication?
- yes
- id
- 43b9deca-c7cc-4512-815f-68a9f0263575 (old id 237330)
- date added to LUP
- 2016-04-01 12:13:14
- date last changed
- 2022-04-05 19:22:37
@article{43b9deca-c7cc-4512-815f-68a9f0263575, abstract = {{In this paper, we investigate the effects of cross-sectional disturbance correlation in a homogeneous panel data unit root test. As reported by other authors, the unit root test has incorrect size in the presence of cross-sectional correlation. We suggest that a previously known estimator can be used to reduce the size distortions. We supply response surface estimates for critical values and study the size characteristics of the proposed test. We find that the suggested estimator performs well in small-sample homogeneous panel data unit root tests. The reduction in size distortion comes at a small cost of lower power against a stationary alternative.}}, author = {{Jönsson, Kristian}}, issn = {{1468-0084}}, language = {{eng}}, number = {{3}}, pages = {{369--392}}, publisher = {{Wiley-Blackwell}}, series = {{Oxford Bulletin of Economics and Statistics}}, title = {{Cross-sectional dependency and size distortion in a small-sample homogeneous panel data unit root test}}, url = {{http://dx.doi.org/10.1111/j.1468-0084.2005.00124.x}}, doi = {{10.1111/j.1468-0084.2005.00124.x}}, volume = {{67}}, year = {{2005}}, }