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Optimal panel unit root testing with covariates

Version 2 2024-06-03, 16:03
Version 1 2019-04-16, 15:02
journal contribution
posted on 2024-06-03, 16:03 authored by A Juodis, Joakim WesterlundJoakim Westerlund
Summary This paper provides asymptotic optimality results for panel unit root tests with covariates by deriving the Gaussian power envelope. The main conclusion is that the use of covariates holds considerable promise in the panel data context, much more so than in the time series context. In fact, the use of the covariates not only leads to increased power, but can actually have an order effect on the shrinking neighbourhoods around unity for which power is non-negligible.

History

Journal

Econometrics Journal

Volume

22

Pagination

57-72

Location

Oxford, Eng.

ISSN

1368-4221

eISSN

1368-423X

Language

English

Publication classification

C1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2018, Royal Economic Society

Issue

1

Publisher

OXFORD UNIV PRESS