Testing for seasonal unit roots in heterogeneous panels in the presence of cross section dependence

Jesús Otero*, Jeremy Smith, Monica Giulietti

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This paper presents two alternative methods for modifying the HEGY-IPS test in the presence of cross-sectional dependency. In general, the bootstrap method (BHEGY-IPS) has greater power than the method suggested by Pesaran [Pesaran, M.H. (2007). A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics, forthcoming.] (CHEGY-IPS), although for large T and high degree of cross-sectional dependency the CHEGY-IPS test dominates the BHEGY-IPS test.

Original languageEnglish
Pages (from-to)179-184
Number of pages6
JournalEconomics Letters
Volume97
Issue number2
DOIs
Publication statusPublished - 1 Nov 2007

Keywords

  • Cross-sectional dependence
  • Heterogeneous dynamic panels
  • Monte Carlo
  • Seasonal unit roots

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