In this paper, we propose a simple extension to the panel case of the covariate-augmented Dickey–Fuller (CADF) test for unit roots developed in Hansen (1995). The panel test we propose is based on a P values combination approach that takes into account cross-section dependence. We show that the test has good size properties and gives power gains with respect to other popular panel approaches.An empirical application is carried out for illustration purposes on international data to test the purchasing power parity (PPP) hypothesis.
A Simple Panel-CADF Test for Unit Roots / Costantini, M; Lupi, C. - In: OXFORD BULLETIN OF ECONOMICS AND STATISTICS. - ISSN 0305-9049. - 75:(2013), pp. 276-296. [10.1111/j.1468-0084.2012.00690.x]
A Simple Panel-CADF Test for Unit Roots
COSTANTINI M;
2013
Abstract
In this paper, we propose a simple extension to the panel case of the covariate-augmented Dickey–Fuller (CADF) test for unit roots developed in Hansen (1995). The panel test we propose is based on a P values combination approach that takes into account cross-section dependence. We show that the test has good size properties and gives power gains with respect to other popular panel approaches.An empirical application is carried out for illustration purposes on international data to test the purchasing power parity (PPP) hypothesis.| File | Dimensione | Formato | |
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