A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends

Research output: Contribution to journalArticlepeer-review

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 languageEnglish
Pages (from-to)160-163
JournalEconomics Letters
Volume125
Issue number2
DOIs
Publication statusPublished - 2014

Subject classification (UKÄ)

  • Economics

Keywords

  • Unit root test
  • Panel data
  • Incidental trends
  • Bias correction
  • Local asymptotic power

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