Title

Panel LM unit-root tests with level shifts

Authors

Authors

K. S. Im; J. Lee;M. Tieslau

Comments

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Abbreviated Journal Title

Oxf. Bull. Econ. Stat.

Keywords

MOVING AVERAGE MODELS; DETERMINISTIC TRENDS; Economics; Social Sciences, Mathematical Methods; Statistics &; Probability

Abstract

This paper proposes a new panel unit-root test based on the Lagrangian multiplier (LM) principle. We show that the asymptotic distribution of the new panel LM test is not affected by the presence of structural shifts. This result holds under a mild condition that N/T --> k, where k is any finite constant. Our simulation study shows that the panel LM unit-root test is not only robust to the presence of structural shifts, but is more powerful than the popular Im, Pesaran and Shin (IPS) test. We apply our new test to the purchasing power parity (PPP) hypothesis and find strong evidence for PPP.

Journal Title

Oxford Bulletin of Economics and Statistics

Volume

67

Issue/Number

3

Publication Date

1-1-2005

Document Type

Article

Language

English

First Page

393

Last Page

419

WOS Identifier

WOS:000229584200006

ISSN

0305-9049

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