Arbeitspapier
Panel unit root tests in the presence of a multifactor error structure
This paper extends the cross sectionally augmented panel unit root test proposed by Pesaran (2007) to the case of a multifactor error structure. The basic idea is to exploit information regarding the unobserved factors that are shared by other time series in addition to the variable under consideration. Importantly, our test procedure only requires specification of the maximum number of factors, in contrast to other panel unit root tests based on principal components that require in addition the estimation of the number of factors as well as the factors themselves. Small sample properties of the proposed test are investigated by Monte Carlo experiments, which suggest that it controls well for size in almost all cases, especially in the presence of serial correlation in the error term, contrary to alternative test statistics. Empirical applications to Fisher's inflation parity and real equity prices across different markets illustrate how the proposed test works in practice.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 2193
- Klassifikation
-
Wirtschaft
Hypothesis Testing: General
Statistical Simulation Methods: General
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
- Thema
-
panel unit root tests
cross section dependence
multi-factor residual structure
Fisher inflation parity
real equity prices
Panel
Unit Root Test
Monte-Carlo-Methode
Faktorenanalyse
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Pesaran, Mohammad Hashem
Smith, L. Vanessa
Yamagata, Takashi
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Pesaran, Mohammad Hashem
- Smith, L. Vanessa
- Yamagata, Takashi
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2008
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