Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68506
Authors: 
Costantini, Mauro
Lupi, Claudio
Year of Publication: 
2011
Series/Report no.: 
Reihe Ökonomie, Institut für Höhere Studien 261
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 extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the test is easy to compute, has good size properties and gives power gains with respect to other popular panel approaches. A procedure to compute the asymptotic p-values of Hansen's CADF test is also a side-contribution of the paper. We also complement Hansen (1995) and Caporale and Pittis (1999) with some new theoretical results. Two empirical applications are carried out for illustration purposes on international data to test the PPP hypothesis and the presence of a unit root in international industrial production indices.
Subjects: 
unit root
panel data
approximate P-values
Monte Carlo
JEL: 
C22
C23
F31
Document Type: 
Working Paper

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