Abstract
Ng (2008) shows how the cross-sectional variance of the observed panel data can be used to construct a simple test for the proportion of non-stationary units. However, in the case with incidental trends the test is distorted. The present note shows how the distortions can be substantially reduced by the use of bias-adjustment. It also investigates the local power of the bias-adjusted test, which is shown to suffer from the same incidental trends problem previously only documented for conventional tt-tests.
Original language | English |
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Pages (from-to) | 160-163 |
Journal | Economics Letters |
Volume | 125 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2014 |
Subject classification (UKÄ)
- Economics
Free keywords
- Unit root test
- Panel data
- Incidental trends
- Bias correction
- Local asymptotic power