A Simple Panel‐CADF Test for Unit Roots*. (30th January 2012)

• Record Type: Journal Article
• Authors: Costantini, Mauro; Lupi, Claudio
• Is Part Of: Oxford bulletin of economics and statistics. Volume 75:Number 2(2013:Apr.)
• Page Start: 276
• Page End: 296
• Publication Date: 2012-01-30
• Subjects: Economic history -- Periodicals; Great Britain -- Economic conditions -- Periodicals; 330.9
• DOI: 10.1111/j.1468-0084.2012.00690.x
• Languages: English
• ISSNs: 0305-9049

Abstract

<abstract abstract-type="main" xml:lang="en"> <title>Abstract</title> <p>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 <xref ref-type="link" rid="b11">Hansen (1995)</xref>. The panel test we propose is based on a <italic>P</italic> 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.</p> </abstract>