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PANICCA - PANIC on Cross-Section Averages

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Author

Summary, in English

The cross-section average (CA) augmentation approach of Pesaran (A simple panel unit root test in presence of cross-section dependence. Journal of Applied Econometrics 2007; 22: 265–312) and Pesaran et al. (Panel unit root test in the presence of a multifactor error structure. Journal of Econometrics 2013; 175: 94–115), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (A PANIC attack on unit roots and cointegration. Econometrica 2004; 72: 1127–1177; Panel unit root tests with cross-section dependence: a further investigation. Econometric Theory 2010; 26: 1088–1114) are among the most popular ‘second-generation’ approaches for cross-section correlated panels. One feature of these approaches is that they have different strengths and weaknesses. The purpose of the current paper is to develop PANICCA, a combined approach that exploits the strengths of both CA and PANIC.

Publishing year

2015

Language

English

Publication/Series

Journal of Applied Econometrics

Document type

Working paper

Publisher

Department of Economics, Lund University

Topic

  • Economics

Keywords

  • PANIC
  • cross-section average augmentation
  • unit root test
  • cross-section dependence
  • common factors

Status

Published

ISBN/ISSN/Other

  • ISSN: 0883-7252
  • ISSN: 1099-1255