A Simple Panel-CADF Test for Unit Roots

Mauro Costantini and Claudio Lupi

No 261, Economics Series from Institute for Advanced Studies

Abstract: In this paper we propose a simple extension to the panel case of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed in Hansen (1995). The extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the test is easy to compute, has good size properties and gives power gains with respect to other popular panel approaches. A procedure to compute the asymptotic p-values of Hansen’s CADF test is also a side-contribution of the paper. We also complement Hansen (1995) and Caporale and Pittis (1999) with some new theoretical results. Two empirical applications are carried out for illustration purposes on international data to test the PPP hypothesis and the presence of a unit root in international industrial production indices.

Keywords: Unit root; panel data; approximate p-values; Monte Carlo (search for similar items in EconPapers)
JEL-codes: C22 C23 F31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2011-01
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)

Downloads: (external link)
https://irihs.ihs.ac.at/id/eprint/2035 First version, 2011 (application/pdf)

Related works:
Journal Article: A Simple Panel-CADF Test for Unit Roots (2013)
Working Paper: A Simple Panel-CADF Test for Unit Roots (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:261

Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria

Access Statistics for this paper

More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().