 A Panic Attack on Unit Roots and CointegrationJushan Bai and Serena Ng () Economics Working Paper Archive from The Johns Hopkins University,Department of Economics Abstract: This paper develops a new methodology that makes use of the factor structure of large dimensional panels to understand the nature of non-stationarity in the data We refer to it as PANIC - a 'Panel Analysis of Non-stationarity in Idiosyncratic and Common components' PANIC consists of univariate and panel tests with a number of novel features It can detect whether the nonstationarity is pervasive or variable-specific or both It tests the components of the data instead of the observed series Inference is therefore more accurate when the components have different orders of integration PANIC also permits the construction of valid panel tests even when cross-section correlation invalidates pooling of statistics constructed using the observed data The key to PANIC is consistent estimation of the components even when the regressions are individually spurious We provide a rigorous theory for estimation and inference In Monte Carlo simulations the tests have very good size and power PANIC is applied to a panel of inflation series Date: 2001-12 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:jhu:papers:469 Access Statistics for this paper More papers in Economics Working Paper Archive from The Johns Hopkins University,Department of Economics 3400 North Charles Street Baltimore, MD 21218. Contact information at EDIRC. |
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