The power performance of fixed-T panel unit root tests allowing for structural breaks

Yiannis Karavias and Elias Tzavalis

Discussion Papers from University of Nottingham, Granger Centre for Time Series Econometrics

Abstract: The asymptotic local power of least squares based fixed-T panel unit root tests allowing for a structural break in their individual effects and/or incidental trends of the AR(1) panel data model is studied. These tests correct the least squares estimator of the autoregressive coeffcient of this panel data model for its inconsistency due to the individual effects and/or incidental trends of the panel.The limiting distributions of the tests are analytically derived under a sequence of local alternatives, assuming that the cross-sectional dimension of the tests (N) grows large. It is shown that the considered fixed-T tests have local power which tends to unity fast only if the panel data model includes individual effects. For panel data models with incidental trends,the power of the tests becomes trivial. However, this problem does not always appear if the tests allow for serial correlation of the error term.

Keywords: Panel data; unit root tests; structural breaks; local power; serial correlation; incidental trends (search for similar items in EconPapers)
Date: 2013-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nottingham.ac.uk/research/groups/grangercentre/documents/13-01.pdf (application/pdf)

Related works:
Working Paper: The Power Performance of Fixed-T Panel Unit Root Tests allowing for Structural Breaks (2013)
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:not:notgts:13/01

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Granger Centre for Time Series Econometrics School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by ().