Panel root tests and the impact of initial observations

In this paper we show that panel unit root tests based on OLS detrending have inferior power relative to tests based on GLS detrending when the deviations of the initial observations from the deterministic components of the series are small. This ranking, however, is reversed for larger deviations. We propose a hybrid panel unit root test that captures the desirable power features of both approaches across the range of initial conditions.

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Year of publication:	2008-03
Authors:	Harvey, David I. ; Leybourne, Stephen J. ; Sakkas, Nikolaos D.
Institutions:	Granger Centre for Time Series Econometrics, School of Economics
Subject:	Panel unit root testing \| OLS detrending \| GLS detrending \| power comparison

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Extent:	application/pdf
Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008497830