An Improved Panel Unit Root Test Using GLS-Detrending

Claude Lopez ()

Econometrics from EconWPA

Abstract: We propose to combine recent developments in univariate and multivariate unit root testing in order to construct a more powerful panel unit root test. We extend the GLS-detrending procedure of Elliott, Rothenberg and Stock (1996) to a panel Augmented Dickey-Fuller test. The finite sample power properties of the new test demonstrate a very large gain when compared to existing tests, especially for small panels. We then investigate the topic of Purchasing Power Parity for the post Bretton- Woods period via this new test. The results show strong rejections of the unit root hypothesis.

Keywords: DF-GLS test; Panel unit root (search for similar items in EconPapers)
JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2003-10-22
Note: Type of Document - pdf; prepared on winXP; pages: 43
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http://129.3.20.41/eps/em/papers/0310/0310003.pdf (application/pdf)

Related works:
Working Paper: An Improved Panel Unit Root Test Using GLS-Detrending (2003)
Working Paper: An Improved Panel Unit Root Test Using GLS-Detrending (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0310003

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