This paper proposes an IV-based panel unit root test that is general enough to accommodate general error serial and cross-section dependence, and a potentially nonlinear deterministic trend function. These allowances make the new test one of the most general around. It is also very simple to implement. Indeed, the IV statistic is asymptotically invariant to not only to all nuisance parameters characterizing the dependence of the errors and the true trend function, but also the deterministic specification of the fitted test regression.
JournalOxford bulletin of economics and statistics
Pagination752 - 764
NotesPrevious versions of the paper were presented at seminars at University of Maastricht, Deakin University, Queensland University of Technology, and Macquarie University. The author thanks seminar participants and in particular Joerg Breitung, Jean-Pierre Urbain, Stan Hurn, Mehdi Hosseinkouchack, Adam Clements, Chris Doucouliagos, Prasad Bhattacharya, Francesco Zanetti (Editor) and two anonymous referees for many constructive comments. Our sincere thanks also to the Knut and Alice Wallenberg Foundation for financial support through a Wallenberg Academy Fellowship and to the Jan Wallander and Tom Hedelius Foundation for financial support under research grant number
Publication classificationC1 Refereed article in a scholarly journal; C Journal article
Copyright notice2016, Department of Economics, University of Oxford and Wiley