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More powerful panel data unit root tests with an application to mean reversion in real exchange rates
Author(s) -
Smith L. Vanessa,
Leybourne Stephen,
Kim TaeHwan,
Newbold Paul
Publication year - 2004
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.723
Subject(s) - mean reversion , unit root , reversion , panel data , sort , econometrics , statistics , unit (ring theory) , economics , mathematics , arithmetic , gene , phenotype , biochemistry , mathematics education , chemistry
Abstract Unit root tests, seeking mean or trend reversion, are frequently applied to panel data. We show that more powerful variants of commonly applied tests are readily available. Moreover, power gains persist when the modifications are applied to bootstrap procedures that may be employed when cross‐correlation of a rather general sort among individual panel members is suspected. Copyright © 2004 John Wiley & Sons, Ltd.