Unit Roots and Identification in Autoregressive Panel Data Models: A Comparison of Alternative Tests

Stephen Roy Bond, Celine Nauges () and Frank Windmeijer ()

No C5-4, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: We compare the finite sample behaviour of various unit root tests for micro panels where the number of individuals is typically large, but the number of time periods is often very small. As in this case some econometric estimators do not identify the parameters of interest when the processes are random walks, it is important to test for unit roots/identification. We find that a t-test based on OLS estimation results provides a simple robust test with high power for cases when the variance of the unobserved heterogeneity is relatively small. Its behaviour is similar to the underidentification test as proposed by Arellano, Hansen and Sentana (1999) for the GMM estimator on a first-differenced model.

Keywords: Generalised Method of Moments; Identification; Unit Root Tests (search for similar items in EconPapers)
JEL-codes: C12 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: Written
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