A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends

Joakim Westerlund

doi:10.1016/j.econlet.2014.09.003

A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends

Joakim Westerlund

Department of Economics

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	160-163
Journal	Economics Letters
Volume	125
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2014.09.003
Publication status	Published - 2014

Subject classification (UKÄ)

Economics

Keywords

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

Access to Document

10.1016/j.econlet.2014.09.003

Cite this

@article{c8eda4df4d8b4ca6bf256ae69bfe9589,

title = "A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends",

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.",

keywords = "Unit root test, Panel data, Incidental trends, Bias correction, Local asymptotic power",

author = "Joakim Westerlund",

year = "2014",

doi = "10.1016/j.econlet.2014.09.003",

language = "English",

volume = "125",

pages = "160--163",

journal = "Economics Letters",

issn = "0165-1765",

publisher = "Elsevier",

number = "2",

}

TY - JOUR

T1 - A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends

AU - Westerlund, Joakim

PY - 2014

Y1 - 2014

N2 - 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.

AB - 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.

KW - Unit root test

KW - Panel data

KW - Incidental trends

KW - Bias correction

KW - Local asymptotic power

U2 - 10.1016/j.econlet.2014.09.003

DO - 10.1016/j.econlet.2014.09.003

M3 - Article

VL - 125

SP - 160

EP - 163

JO - Economics Letters

JF - Economics Letters

SN - 0165-1765

IS - 2

ER -

A Simple Test for Nonstationarity in Mixed Panels with Incidental Trends

Abstract

Subject classification (UKÄ)

Keywords

Access to Document

Fingerprint

Cite this