Abstract
An effective way to control for cross-section correlation when conducting a panel unit root test is to remove the common factors from the data. However, there remain many ways to use the defactored residuals to construct a test. In this paper, we use the panel analysis of nonstationarity in idiosyncratic and common components (PANIC) residuals to form two new tests. One estimates the pooled autoregressive coefficient, and one simply uses a sample moment. We establish their large-sample properties using a joint limit theory. We find that when the pooled autoregressive root is estimated using data detrended by least squares, the tests have no power. This result holds regardless of how the data are defactored. All PANIC-based pooled tests have nontrivial power because of the way the linear trend is removed.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Social Sciences (miscellaneous)
Cited by
135 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献