A nonlinear panel unit root test under cross section dependence

Mario Cerrato, Christian de Peretti and Nick Sarantis
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Nick Sarantis: London Metropolitan University

No 07-12, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: We propose a nonlinear heterogeneous unit root test for testing the null hypothesis of unitroots processes against the alternative that allows a proportion of units to be generated by globally stationary ESTAR processes and a remaining non-zero proportion to be generated by unit root processes. The proposed test is simple to apply and accommodates cross sectional dependence. Monte Carlo simulation shows that our test holds correct size and under the hypothesis that data are generated by globally stationary ESTAR processes has a better power than the recent test proposed in Pesaran (2005).An application to a panel of bilateral real exchange rate series with the US Dollar from the 11 major OECD countries is provided.

Keywords: Non-linear panel unit root tests; cross sectional dependence; Purchasing Power Parity (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: A Nonlinear Panel Unit Root Test under Cross Section Dependence (2011)
Working Paper: A nonlinear panel unit root test under cross section dependence (2011)
Working Paper: A Nonlinear Panel Unit Root Test under Cross Section Dependence (2009)
Working Paper: A Nonlinear Panel Unit Root Test under Cross Section Dependence (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eve:wpaper:07-12

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