Hybrid Rank-Based Panel Unit Root Tests

Ramon van den Akker (), Bas J. M. Werker () and Bo Zhou ()
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Ramon van den Akker: Tilburg University
Bas J. M. Werker: Tilburg University
Bo Zhou: Virginia Tech

A chapter in Recent Advances in Econometrics and Statistics, 2024, pp 105-125 from Springer

Abstract: Abstract We study optimality of unit root tests in a semiparametric panel setting with both large time-series and cross-sectional dimension. While, with finite cross-sectional dimension, the limit experiments are locally asymptotically Brownian functional (LABF), we find the classical locally asymptotically normal (LAN) structure with large cross-sectional dimension. This leads to an upper bound for the power of tests using sequential asymptotics. We propose a hybrid rank-based test, based on cross-sectional ranks per time unit, that is point optimal. We corroborate our theoretical results with a Monte Carlo study.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-61853-6_6

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DOI: 10.1007/978-3-031-61853-6_6

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