An Improved Panel Unit Root Test Using GLS-Detrending

Claude Lopez

Econometrics from University Library of Munich, Germany

Abstract: We propose to combine recent developments in univariate and mul- tivariate unit root testing in order to construct a more powerful panel unit root test. We extend the GLS-detrending procedure of Elliott, Rothenberg and Stock (1996) to a panel Augmented Dickey-Fuller test. The .nite sample power properties of the new test demonstrate a very large gain when compared to existing tests, especially for small panels. We then investigate the topic of Purchasing Power Parity for the post Bretton-Woods period via this new test. The results show strong rejections of the unit root hypothesis.

Keywords: DF-GLS; panel unit root (search for similar items in EconPapers)
JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2003-10-23, Revised 2003-10-24
New Economics Papers: this item is included in nep-ecm
Note: Type of Document - pdf; prepared on XP; pages: 43
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https://econwpa.ub.uni-muenchen.de/econ-wp/em/papers/0310/0310006.pdf (application/pdf)

Related works:
Journal Article: A Panel Unit Root Test with Good Power in Small Samples (2009)
Working Paper: A Panel Unit Root Test with Good Power in Small Samples (2007)
Working Paper: An Improved Panel Unit Root Test Using GLS-Detrending (2003)
Working Paper: An Improved Panel Unit Root Test Using GLS-Detrending (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0310006

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