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PANICCA - PANIC on Cross-Section Averages

Reese, Simon LU and Westerlund, Joakim LU (2015)
Abstract
The cross-section average (CA) augmentation approach of Pesaran (A simple panel unit root test in presence of cross-section dependence. Journal of Applied Econometrics 2007; 22: 265–312) and Pesaran et al. (Panel unit root test in the presence of a multifactor error structure. Journal of Econometrics 2013; 175: 94–115), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (A PANIC attack on unit roots and cointegration. Econometrica 2004; 72: 1127–1177; Panel unit root tests with cross-section dependence: a further investigation. Econometric Theory 2010; 26: 1088–1114) are among the most popular ‘second-generation’ approaches for cross-section correlated panels.... (More)
The cross-section average (CA) augmentation approach of Pesaran (A simple panel unit root test in presence of cross-section dependence. Journal of Applied Econometrics 2007; 22: 265–312) and Pesaran et al. (Panel unit root test in the presence of a multifactor error structure. Journal of Econometrics 2013; 175: 94–115), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (A PANIC attack on unit roots and cointegration. Econometrica 2004; 72: 1127–1177; Panel unit root tests with cross-section dependence: a further investigation. Econometric Theory 2010; 26: 1088–1114) are among the most popular ‘second-generation’ approaches for cross-section correlated panels. One feature of these approaches is that they have different strengths and weaknesses. The purpose of the current paper is to develop PANICCA, a combined approach that exploits the strengths of both CA and PANIC. (Less)
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author
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organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
PANIC, cross-section average augmentation, unit root test, cross-section dependence, common factors
pages
21 pages
publisher
Department of Economics, Lund University
language
English
LU publication?
yes
id
ff5d92cd-0da4-4a38-8f0f-1cd8e8dc258f (old id 5044644)
date added to LUP
2016-04-01 09:52:33
date last changed
2024-12-02 14:22:20
@misc{ff5d92cd-0da4-4a38-8f0f-1cd8e8dc258f,
  abstract     = {{The cross-section average (CA) augmentation approach of Pesaran (A simple panel unit root test in presence of cross-section dependence. Journal of Applied Econometrics 2007; 22: 265–312) and Pesaran et al. (Panel unit root test in the presence of a multifactor error structure. Journal of Econometrics 2013; 175: 94–115), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (A PANIC attack on unit roots and cointegration. Econometrica 2004; 72: 1127–1177; Panel unit root tests with cross-section dependence: a further investigation. Econometric Theory 2010; 26: 1088–1114) are among the most popular ‘second-generation’ approaches for cross-section correlated panels. One feature of these approaches is that they have different strengths and weaknesses. The purpose of the current paper is to develop PANICCA, a combined approach that exploits the strengths of both CA and PANIC.}},
  author       = {{Reese, Simon and Westerlund, Joakim}},
  keywords     = {{PANIC; cross-section average augmentation; unit root test; cross-section dependence; common factors}},
  language     = {{eng}},
  note         = {{Working Paper}},
  publisher    = {{Department of Economics, Lund University}},
  title        = {{PANICCA - PANIC on Cross-Section Averages}},
  year         = {{2015}},
}