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Economics Working Papers, Department of Economics, CAU Kiel >
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http://hdl.handle.net/10419/28395
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| Title: | | The effects of variance breaks on homogenous panel unit root tests  |
| Authors: | | Herwartz, Helmut Siedenburg, Florian |
| Issue Date: | | 2009 |
| Series/Report no.: | | Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2009,07 |
| Abstract: | | Noting that many economic variables display occasional shifts in their second order moments, we investigate the performance of homogenous panel unit root tests in the presence of permanent volatility shifts. It is shown that in this case, panel unit root tests derived under time invariant innovation variances lose control over actual significance levels while the test proposed by Herwartz and Siedenburg (2008) retains size control. A simulation study of the finite sample properties confirms the theoretical results in finite samples. As an empirical illustration, we reassess evidence on the Fisher hypothesis. |
| Subjects: | | Panel unit root tests variance breaks cross sectional dependence Fisher hypothesis |
| JEL: | | C23 C12 E40 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Economics Working Papers, Department of Economics, CAU Kiel
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