The Asymptotic Distribution of the CADF Unit Root Test in the Presence of Heterogeneous AR(p) Errors
Author
Summary, in English
The CADF test of Pesaran (A Simple Panel Unit Root Test in Presence of Cross-Section
Dependence, Journal of Applied Econometrics 22, 265–312, 2007) are among the most popular
univariate tests for cross-section correlated panels around. Yet, the existing asymptotic
analysis of this test statistic is limited to a model in which the errors are assumed to
follow a simple AR(1) structure with homogenous autoregressive coefficients. One reason
for this is that the model involves an intricate identification issue, as both the serial
and cross-section correlation structures of the errors are unobserved. The purpose of the
current paper is to tackle this issue and in so doing extend the existing analysis to the
case of AR(p) errors with possibly heterogeneous coefficients.
Dependence, Journal of Applied Econometrics 22, 265–312, 2007) are among the most popular
univariate tests for cross-section correlated panels around. Yet, the existing asymptotic
analysis of this test statistic is limited to a model in which the errors are assumed to
follow a simple AR(1) structure with homogenous autoregressive coefficients. One reason
for this is that the model involves an intricate identification issue, as both the serial
and cross-section correlation structures of the errors are unobserved. The purpose of the
current paper is to tackle this issue and in so doing extend the existing analysis to the
case of AR(p) errors with possibly heterogeneous coefficients.
Department/s
Publishing year
2016
Language
English
Pages
303-317
Publication/Series
Statistical Papers
Volume
57
Issue
2
Document type
Journal article
Publisher
Springer
Topic
- Economics
Keywords
- Unit root test
- error serial correlation
- common factor
- cross-section augmentation.
Status
Published
ISBN/ISSN/Other
- ISSN: 1613-9798