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Panicca: Panic on Cross-Section Averages

Reese, Simon LU and Westerlund, Joakim LU (2015) In Journal of Applied Econometrics p.1-21
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
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
cross-section average augmentation, PANIC, unit root test, cross-section dependence, common factors
in
Journal of Applied Econometrics
issue
Online: 26 AUG
pages
1 - 21
publisher
John Wiley & Sons
external identifiers
  • scopus:84940564864
ISSN
0883-7252
DOI
10.1002/jae.2487
language
English
LU publication?
yes
id
df4aceb9-e40d-4590-a9bc-187818121f09 (old id 7995126)
alternative location
http://onlinelibrary.wiley.com/doi/10.1002/jae.2487/epdf
date added to LUP
2015-09-29 11:26:44
date last changed
2017-01-01 04:08:50
@article{df4aceb9-e40d-4590-a9bc-187818121f09,
  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},
  issn         = {0883-7252},
  keyword      = {cross-section average augmentation,PANIC,unit root test,cross-section dependence,common factors},
  language     = {eng},
  number       = {Online: 26 AUG},
  pages        = {1--21},
  publisher    = {John Wiley & Sons},
  series       = {Journal of Applied Econometrics},
  title        = {Panicca: Panic on Cross-Section Averages},
  url          = {http://dx.doi.org/10.1002/jae.2487},
  year         = {2015},
}