Joakim Westerlund
Professor, Programchef - Magisterprogram i Dataanalys och ekonomi
Likelihood Ratio Tests for a Unit Root in Panels with Random Effects
Författare
Summary, in English
Because of the fixed heterogeneity of their models, most panel unit root tests impose restrictions on the rate at which the number of time periods, T, and the number of cross-section units, N, go to infinity. A common example of such a restriction is
N/T→0
, which in practice means that T≫N
, a condition that is not always met. In the current paper the heterogeneity is given a parsimonious random effects specification, which is used as a basis for developing a new likelihood ratio test for a unit root. The asymptotic analysis shows that the new test is valid for all (N,T)
expansion paths satisfying N/T5→0
, which represents a substantial improvement when compared to the existing fixed effects literature.
N/T→0
, which in practice means that T≫N
, a condition that is not always met. In the current paper the heterogeneity is given a parsimonious random effects specification, which is used as a basis for developing a new likelihood ratio test for a unit root. The asymptotic analysis shows that the new test is valid for all (N,T)
expansion paths satisfying N/T5→0
, which represents a substantial improvement when compared to the existing fixed effects literature.
Avdelning/ar
- Nationalekonomiska institutionen
Publiceringsår
2017-05-04
Språk
Engelska
Sidor
627-654
Publikation/Tidskrift/Serie
Statistics
Volym
51
Issue
3
Dokumenttyp
Artikel i tidskrift
Förlag
Taylor & Francis
Ämne
- Social Sciences
- Probability Theory and Statistics
Status
Published
ISBN/ISSN/Övrigt
- ISSN: 0233-1888