A modified LLC panel unit root test of the PPP hypothesis
(2013) In Empirical Economics 44(2). p.833-860- Abstract
- In a recent study,Westerlund (Empir Econ 37:517–531, 2009) shows that the performance of the popular LLC (Levin et al., J Econ 108:1–24, 2002) panel unit root test depends critically on the choice of lag truncation used when correcting for serial correlation, and that it is only when this parameter is set as a function of time that the power raises above size. The purpose of the current paper is to propose a modified test that does not suffer from this drawback. The new test is not only simpler to compute but also superior in terms of small-sample performance, which is illustrated using an example purchasing power parity for less developed countries.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/3626426
- author
- Westerlund, Joakim LU and Blomquist, Johan LU
- organization
- publishing date
- 2013
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Non-stationary panel data, Panel unit root test, Purchasing power parity, Cross-section dependence
- in
- Empirical Economics
- volume
- 44
- issue
- 2
- pages
- 833 - 860
- publisher
- Physica Verlag
- external identifiers
-
- wos:000316345900021
- scopus:84875218514
- ISSN
- 0377-7332
- DOI
- 10.1007/s00181-012-0552-x
- language
- English
- LU publication?
- yes
- id
- fecfed8b-bb25-4f00-b4f9-18bba7053687 (old id 3626426)
- date added to LUP
- 2016-04-01 14:37:08
- date last changed
- 2022-01-28 01:36:02
@article{fecfed8b-bb25-4f00-b4f9-18bba7053687, abstract = {{In a recent study,Westerlund (Empir Econ 37:517–531, 2009) shows that the performance of the popular LLC (Levin et al., J Econ 108:1–24, 2002) panel unit root test depends critically on the choice of lag truncation used when correcting for serial correlation, and that it is only when this parameter is set as a function of time that the power raises above size. The purpose of the current paper is to propose a modified test that does not suffer from this drawback. The new test is not only simpler to compute but also superior in terms of small-sample performance, which is illustrated using an example purchasing power parity for less developed countries.}}, author = {{Westerlund, Joakim and Blomquist, Johan}}, issn = {{0377-7332}}, keywords = {{Non-stationary panel data; Panel unit root test; Purchasing power parity; Cross-section dependence}}, language = {{eng}}, number = {{2}}, pages = {{833--860}}, publisher = {{Physica Verlag}}, series = {{Empirical Economics}}, title = {{A modified LLC panel unit root test of the PPP hypothesis}}, url = {{http://dx.doi.org/10.1007/s00181-012-0552-x}}, doi = {{10.1007/s00181-012-0552-x}}, volume = {{44}}, year = {{2013}}, }