A long memory panel unit root test: PPP revisited

Jonas Andersson and Johan Lyhagen ()

No 303, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper two techniques, long memory and panel data models, are combined in order to increase the power of unit root tests. The power is shown to be always better against fractional alternatives and usually against autoregressive alternatives. The test is then used to reanalyze data sets investigated by Cheung and Lai (1993), Oh (1996) and Papell (1997) who studied the purchasing power parity. In some cases, the test rejected the hypothesis of no cointegration between foreign and domestic prices where the other authors tests did not.

Keywords: Unit root; Long memory; Purchasing power parity (search for similar items in EconPapers)
JEL-codes: C12 C14 C22 C23 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1999-02-12
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (4)

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