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Panicca: Panic on Cross‐Section Averages
Author(s) -
Reese Simon,
Westerlund Joakim
Publication year - 2015
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2487
Subject(s) - panic , section (typography) , econometrics , economics , computer science , psychology , psychiatry , anxiety , operating system
Summary 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. Copyright © 2015 John Wiley & Sons, Ltd.