Open AccessPoint‐optimal panel unit root tests with serially correlated errors
Author(s) -
Moon Hyungsik Roger,
Perron Benoit,
Phillips Peter C. B.
Publication year - 2014
Publication title -
the econometrics journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.861
H-Index - 36
eISSN - 1368-423X
pISSN - 1368-4221
DOI - 10.1111/ectj.12030
Subject(s) - unit root , statistic , statistics , variance (accounting) , centring , mathematics , point (geometry) , econometrics , engineering , economics , geometry , accounting , mechanical engineering
Summary Generalizations of the point‐optimal panel unit root tests of Moon, Perron and Phillips (MPP) are developed to cover cases of serially correlated errors. The resulting statistics involve two modifications relative to those of MPP: (a) the error variance is replaced by the long‐run variance; (b) centring of the statistic is adjusted to correct for second‐order bias effects induced by the correlation between the error and lagged dependent variable.