Optimal panel unit root testing with covariates
ArtÅ«ras Juodis and
Econometrics Journal, 2019, vol. 22, issue 1, 57-72
SummaryThis paper provides asymptotic optimality results for panel unit root tests with covariates by deriving the Gaussian power envelope. The main conclusion is that the use of covariates holds considerable promise in the panel data context, much more so than in the time series context. In fact, the use of the covariates not only leads to increased power, but can actually have an order effect on the shrinking neighbourhoods around unity for which power is non-negligible.
Keywords: panel data; unit root test; Gaussian power envelope; covariates (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:emjrnl:v:22:y:2019:i:1:p:57-72.
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