Premium
Panel unit root tests and spatial dependence
Author(s) -
Baltagi Badi H.,
Bresson Georges,
Pirotte Alain
Publication year - 2007
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.950
Subject(s) - unit root , panel data , monte carlo method , econometrics , spatial dependence , unit root test , unit (ring theory) , statistics , spatial correlation , set (abstract data type) , spatial econometrics , correlation , mathematics , computer science , cointegration , mathematics education , programming language , geometry
This paper studies the performance of panel unit root tests when spatial effects are present that account for cross‐section correlation. Monte Carlo simulations show that there can be considerable size distortions in panel unit root tests when the true specification exhibits spatial error correlation. These tests are applied to a panel data set on net real income from the 1000 largest French communes observed over the period 1985–1998. Copyright © 2007 John Wiley & Sons, Ltd.