A Locally Optimal Test for No Unit Root in Cross-sectionally Dependent Panel Data

Kaddour Hadri (k.hadri@qub.ac.uk) and Eiji Kurozumi (kurozumi@stat.hit-u.ac.jp)

Hitotsubashi Journal of Economics, 2011, vol. 52, issue 2, 165-184

Abstract: This paper develops a simple test for the null hypothesis of no unit root for panel data with cross-sectional dependence in the form of a common factor in the disturbance. We do not estimate the common factor but mop-up its effect by employing the same method as the one proposed in Pesaran (2007) in the unit root testing context. We show that our test is asymptotically locally optimal, although the optimality is not guaranteed under a wide range of the alternative.

Keywords: KPSS test; unit root; cross-sectional dependence; LM test; locally best test (search for similar items in EconPapers)
JEL-codes: C12 C33 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/22026/HJeco0520201650.pdf

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Working Paper: A Locally Optimal Test for No Unit Root in Cross-Sectionally Dependent Panel Data (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:52:y:2011:i:2:p:165-184

DOI: 10.15057/22026

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