Giulietti, Monica, Otero, Jesus and Smith, Jeremy (Jeremy P.) (2006) Testing for unit roots in three-dimensional heterogeneous panels in the presence of cross-sectional dependence. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

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Abstract

This paper extends the cross-sectionally augmented IPS (CIPS) test of Pesaran (2006) to a three-dimensional (3D) panel. This 3D-CIPS test is correctly sized in the presence of cross-sectional dependency. Comparing its power performance to that of a bootstrapped IPS (BIPS) test, we find that the BIPS test invariably dominates, although for high levels of cross-sectional dependency the 3D-CIPS test can out-perform the BIPS test.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Panel analysis, Monte Carlo method, Statistical hypothesis testing, Economics -- Simulation methods, Time-series analysis
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	October 2006
Number:	No.771
Number of Pages:	10
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Universidad del Rosario (UdR)
Version or Related Resource:	Giulietti, M., Otero, J. and Smith, J. (2008). Testing for unit roots in three-dimensional heterogeneous panels in the presence of cross-sectional dependence. Economics Letters, 101(3), pp. 188-192. http://wrap.warwick.ac.uk/id/eprint/28844
Related URLs:	Related item in WRAP
References:	Baltagi, B. H. (1987). On estimating from a more general time-series cum cross-section data structure. The American Economist 31, 69�71. Chang, Y. (2004). Bootstrap unit root tests in panels with cross-sectional dependency. Journal of Econometrics 120, 263�293. Davies, A. and K. Lahiri (1995). A new framework for analyzing survey forecasts using three-dimensional panel data. Journal of Econometrics 68, 205�227. Ghosh, S. K. (1976). Estimating from a more general time-series cum cross-section data structure. The American Economist 21, 15�21. Goldberg, P. K. and F. Verboven (2005). Market integration and convergence to the law of one price: Evidence from the european car market. Journal of International Economics 65, 49�73. Im, K., M. H. Pesaran, and Y. Shin (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53�-74. Li, H. and G. S. Maddala (1996). Bootstrapping time series models. Econometric Reviews 15, 115�-195. Maddala, G. S. and S. Wu (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics 61, 631�652. O'Connell, P. G. J. (1998). The overvaluation of purchasing power parity. Journal of International Economics 44, 1�19. Pesaran, M. H. (2006). A simple panel unit root test in the presence of cross section dependence. Cambridge University, Department of Applied Economics Working Paper 0346 (September 2003, Revised January 2006). Quah, D. (1994). Exploiting cross-section variations for unit root inference in dynamic data. Economics Letters 44, 9�19.
URI:	http://wrap.warwick.ac.uk/id/eprint/1428

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