Karavias, Yiannis and Tzavalis, Elias (2012): On the Local Power of Fixed T Panel Unit Root Tests with Serially Correlated Errors.
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Analytical asymptotic local power functions are employed to study the effects of general form short term serial correlation on �fixed-T panel data unit root tests. Two models are considered, one that has only individual intercepts and one that has both individual intercepts and individual trends. It is shown that tests based on IV estimators are more powerful in all cases examined. Even more, for the model with individual trends an IV based test is shown to have non-trivial local power at the natural root-N rate.
|Item Type:||MPRA Paper|
|Original Title:||On the Local Power of Fixed T Panel Unit Root Tests with Serially Correlated Errors|
|Keywords:||Panel data models; unit roots; local power functions; serial correlation; incidental trends|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C23 - Models with Panel Data; Longitudinal Data; Spatial Time Series|
|Depositing User:||Yiannis Karavias|
|Date Deposited:||07. Dec 2012 16:25|
|Last Modified:||20. Feb 2013 02:35|
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