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

Kaddour Hadri, E. Kurozumi, Daisuke Yamazaki

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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.
Original languageEnglish
Pages (from-to)676-700
JournalManchester School
Issue number6
Early online date08 Aug 2014
Publication statusPublished - Dec 2015



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

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