Title

Panel Lm Unit-Root Tests With Level Shifts

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. © Blackwell Publishing Ltd, 2005.

Publication Date

6-1-2005

Publication Title

Oxford Bulletin of Economics and Statistics

Volume

67

Issue

3

Number of Pages

393-419

Document Type

Review

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/j.1468-0084.2005.00125.x

Socpus ID

19844372381 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/19844372381

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