Joakim Westerlund
Professor, Programme director – Master of Data Analytics and Business Economics
Unit Root Inference in Generally Trending and Cross-Correlated Fixed-T Panels
Author
Summary, in English
This article proposes a new panel unit root test based on the generalized method of moments approach for panels with a possibly small number of time periods, T, and a large number of cross-sectional units, N. In the model that we consider the deterministic trend function is essentially unrestricted and the errors obey a multifactor structure that allows for rich forms of unobserved heterogeneity. In spite of these allowances, the GMM estimator considered is shown to be asymptotically unbiased, (Formula presented.)-consistent, and asymptotically normal for all values of the autoregressive (AR) coefficient, ρ, including unity, making it a natural candidate for unit root inference. Results from our Monte Carlo study suggest that the asymptotic properties are borne out well in small samples. The implementation is illustrated by using a large sample of US banking institutions to test Gibrat’s Law.
Department/s
- Department of Economics
Publishing year
2018-07-03
Language
English
Pages
493-504
Publication/Series
Journal of Business & Economic Statistics
Volume
36
Issue
3
Document type
Journal article
Publisher
American Statistical Association
Topic
- Probability Theory and Statistics
Status
Published
ISBN/ISSN/Other
- ISSN: 0735-0015