Synergy Between an Improved Covariate Unit Root Test and Cross-sectionally Dependent Panel Data Unit Root Tests, with two Applications

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      This paper proposes the use of an improved covariate unit root test which exploits the cross-sectional dependence information when the panel data null hypothesis of a unit root is rejected. More explicitly, to increase the power of the test, we suggest the utilization of more than one covariate and offer several ways to select the ‘best’ covariates from the set of potential covariates represented by the individuals in the panel. Employing our methods, we investigate the Prebish-Singer hypothesis for nine commodity prices. Our results show that this hypothesis holds for all but the price of petroleum.

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      • Synergy Between an Improved Covariate Unit Root Test and Cross-sectionally Dependent Panel Data Unit Root Tests, with two Applications

        Rights statement: © 2014 The University of Manchester and John Wiley & Sons This is the peer reviewed version of the following article: Hadri, K., Kurozumi, E. and Yamazaki, D. (2014), Synergy between an Improved Covariate Unit Root Test and Cross-sectionally Dependent Panel Data Unit Root Tests. The Manchester School., which has been published in final form at doi: 10.1111/manc.12080 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving

        Accepted author manuscript, 187 KB, PDF-document

      DOI

      Original languageEnglish
      Pages (from-to)676-700
      JournalManchester School
      Journal publication dateDec 2015
      Issue number6
      Volume83
      Early online date08 Aug 2014
      DOIs
      StatePublished - Dec 2015

        Research areas

      • Synergy between an Improved Covariate Unit Root Test and Cross‐sectionally Dependent Panel Data Unit Root Tests

      ID: 11705620