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Pooled panel unit root tests and the effect of past initialization

Westerlund, Joakim 2016, Pooled panel unit root tests and the effect of past initialization, Econometric reviews, vol. 35, no. 3, pp. 396-427, doi: 10.1080/07474938.2013.833829.

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Title Pooled panel unit root tests and the effect of past initialization
Author(s) Westerlund, Joakim
Journal name Econometric reviews
Volume number 35
Issue number 3
Start page 396
End page 427
Total pages 32
Publisher Taylor & Francis
Place of publication London, Eng.
Publication date 2016
ISSN 0747-4938
1532-4168
Keyword(s) Initial value
Local asymptotic power
Panel unit root test
Summary This paper analyzes the role of initialization when testing for a unit root in panel data, an issue that has received surprisingly little attention in the literature. In fact, most studies assume that the initial value is either zero or bounded. As a response to this, the current paper considers a model in which the initialization is in the past, which is shown to have several distinctive features that makes it attractive, even in comparison to the common time series practice of making the initial value a draw from its unconditional distribution under the stationary alternative. The results have implications not only for theory, but also for applied work. In particular, and in contrast to the time series case, in panels the effect of the initialization need not be negative but can actually lead to improved test performance.
Language eng
DOI 10.1080/07474938.2013.833829
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Taylor & Francis
Persistent URL http://hdl.handle.net/10536/DRO/DU:30077745

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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