A NOTE ON THE POOLING OF INDIVIDUAL PANIC UNIT ROOT TESTS

Joakim Westerlund and Rolf Larsson

Econometric Theory, 2009, vol. 25, issue 06, pages 1851-1868

Abstract: One of the most cited studies in recent years within the field of nonstationary panel data analysis is that of Bai and Ng (2004), in which the authors propose PANIC, a new framework for analyzing the nonstationarity of panels with idiosyncratic and common components. The problem is that the asymptotic validity of PANIC as a platform for constructing pooled panel unit root tests based on averaging is not fully proven. This paper provides the required results, whose usefulness is verified through simulations.

Date: 2009

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