Hostname: page-component-848d4c4894-sjtt6 Total loading time: 0 Render date: 2024-07-07T14:06:29.222Z Has data issue: false hasContentIssue false
  • English
  • Français

ON THE BREITUNG TEST FOR PANEL UNIT ROOTS AND LOCAL ASYMPTOTIC POWER

Published online by Cambridge University Press:  03 November 2006

H.R. Moon ,
B. Perron  and
P.C.B. Phillips
H.R. Moon
Affiliation:
University of Southern California
B. Perron
Affiliation:
University of Montreal
P.C.B. Phillips
Affiliation:
Yale University
Get access Rights & Permissions [Opens in a new window]

Abstract

This note analyzes the local asymptotic power properties of a test proposed by Breitung (2000, in B. Baltagi (ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels). We demonstrate that the Breitung test, like many other tests (including point optimal tests) for panel unit roots in the presence of incidental trends, has nontrivial power in neighborhoods that shrink toward the null hypothesis at the rate of n−1/4T−1 where n and T are the cross-section and time-series dimensions, respectively. This rate is slower than the n−1/2T−1 rate claimed by Breitung. Simulation evidence documents the usefulness of the asymptotic approximations given here.The authors thank Paolo Paruolo and a referee for comments on an earlier version of the paper. Phillips acknowledges partial support from a Kelly Fellowship and the NSF under grant SES 04-142254. Perron acknowledges financial support from FQRSC, SSHRC, and MITACS.

Type
NOTES AND PROBLEMS
Information
Econometric Theory , Volume 22 , Issue 6 , December 2006 , pp. 1179 - 1190
Copyright
© 2006 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Baltagi, B.H. & C. Kao (2000) Nonstationary panels, cointegration in panels and dynamic panels: A survey. In B.H. Baltagi (ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, vol. 5, 7–51. JAI.CrossRefGoogle Scholar
Breitung, J. (2000) The local power of some unit root tests for panel data. In B.H. Baltagi (ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels, Advances in Econometrics, vol. 15, 161–178. JAI.CrossRefGoogle Scholar
Breitung, J. & M.H. Pesaran (2005) Unit roots and cointegration in panels. Forthcoming in L. Matyas & P. Sevestre (eds.), The Econometrics of Panel Data, 3rd ed. Kluwer Academic Publishers. Available at http://www.econ.cam.ac.uk/faculty/pesaran/panelUnitCoin05November05.pdf.Google Scholar
Choi, I. (2004) Nonstationary Panels. Forthcoming in Palgrave Handbook of Econometrics, vol. 1. Available at http://ihome.ust.hk/∼inchoi/InChoiRev3.pdf.Google Scholar
Hurlin, C. & V. Mignon (2004) Second Generation Panel Unit Root Tests. Mimeo, THEMA-CNRS, Université de Paris X. Available at http://thema.u-paris10.fr/papers/2004-21Mignon.pdf.Google Scholar
Levin, A., F. Lin, & C. Chu (2002) Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics 108, 1–24.CrossRefGoogle Scholar
Moon, H.R., B. Perron, & P.C.B. Phillips (2005) Incidental Trends and the Power of Panel Unit Root Tests. Mimeo. Available at http://mapageweb.umontreal.ca/perrob/power.pdf.CrossRefGoogle Scholar
Moon, H.R., B. Perron, & P.C.B. Phillips (2006) On the Breitung Test for Panel Unit Roots and Local Asymptotic Power—Further Calculations. Mimeo. Available at http://mapageweb.umontreal.ca/perrob/breitung_appendix.pdf.CrossRefGoogle Scholar
Moon, H.R. & P.C.B. Phillips (2004) GMM estimation of autoregressive roots near unity with panel data. Econometrica 72, 467–522.CrossRefGoogle Scholar
Phillips, P.C.B. & H.R. Moon (1999) Linear regression limit theory for nonstationary panel data. Econometrica 67, 1057–1111.CrossRefGoogle Scholar
Ploberger, W. & P.C.B. Phillips (2002) Optimal Testing for Unit Roots in Panel Data. Mimeo, Yale University.Google Scholar