Panel Stationarity Tests with Cross-sectional Dependence

David Harris, Stephen Leybourne () and Brendan McCabe

Econometrics from University Library of Munich, Germany

Abstract: We present a test of the null hypothesis of stationarity against unit root alternatives for panel data that allows for arbitrary cross- sectional dependence. We treat the short run time series dynamics non- parametrically and thus avoid the need to fit separate models for the individual series. The statistic is simple to compute and is asymptotically normally distributed, even in the presence of a wide range of deterministic components. Taken together, these features provide a generally applicable solution to the problem of testing for stationarity versus unit roots in macro-panel based data. The test is applied to assess the validity of the purchasing power parity hypothesis and finds significant evidence against the hypothesis being true.

JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003-11-17
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: Type of Document - ; pages: 21
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0311005

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