In this note we derive the local asymptotic power function of the standardized averaged Dickey–Fuller panel unit root statistic of Im, Pesaran, and Shin (2003, <italic>Journal of Econometrics</italic>, 115, 53–74), allowing for heterogeneous deterministic intercept terms. We consider the situation where the...

In this paper we show that panel unit root tests based on OLS detrending have inferior power relative to tests based on GLS detrending when the deviations of the initial observations from the deterministic components of the series are small. This ranking, however, is reversed for larger...