Panel Unit Root Tests and Spatial Dependence

Badi Baltagi (), Georges BRESSON () and Alain Pirotte

No 88, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper studies the performance of panel unit root tests when spatial effects are present that account for cross-section correlation. Monte Carlo simulations show that there can be considerable size distortions in panel unit root tests when the true specification exhibits spatial error correlation. These tests are applied to a panel data set on net real income from the 1000 largest French communes observed over the period 1985-1998.

Keywords: Nonstationarity; panel data; spatial dependence; cross-section correlation; unit root tests (search for similar items in EconPapers)
JEL-codes: C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-geo
Date: 2006-12
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Journal Article: Panel unit root tests and spatial dependence (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:max:cprwps:88

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