Testing for stationarity in large panels with cross-dependence, and US evidence on unit labor cost

Matei Demetrescu, Uwe Hassler and Adina Tarcolea

Journal of Applied Statistics, 2010, vol. 37, issue 8, 1381-1397

Abstract: A new stationarity test for heterogeneous panel data with large cross-sectional dimension is developed and used to examine a panel with growth rates of unit labor cost in the USA. The test allows for strong cross-unit dependence in the form of unbounded long-run correlation matrices, for which a simple parameterization is proposed. A KPSS-type distribution results asymptotically if letting T→∞ be followed by N→∞. Some evidence against stationarity (short memory) is found for the examined series.

Keywords: panel KPSS-type test; cross-correlation; inflation dynamics (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/02664760903038398

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