PANICCA - PANIC on Cross-Section Averages

Simon Reese () and Joakim Westerlund
Additional contact information
Simon Reese: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden, http://www.nek.lu.se/en/contact/nek-sor

No 2015:3, Working Papers from Lund University, Department of Economics

Abstract: The cross-section average (CA) augmentation approach of Pesaran (2007) and Pesaran et al. (2013), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (2004, 2010) are among the most popular “second-generation” approaches for cross-section correlated panels. One feature of these approaches is that they have different strengths and weaknesses. The purpose of the current paper is to develop PANICCA, a combined approach that exploits the strengths of both CA and PANIC.

Keywords: PANIC; cross-section average augmentation; unit root test; cross-section dependence; common factors (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 C36 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-10-20, Revised 2015-03-24
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Reese, Simon and Joakim Westerlund, 'PANICCA - PANIC on Cross-Section Averages' in Journal of Applied Econometrics, 2016, pages 961-981.

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Journal Article: Panicca: Panic on Cross‐Section Averages (2016)
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