This paper investigates the asymptotic local power of the the averaged t-test of Im, Pesaran and Shin (2003, IPS hereafter) in the presence of both initial explosive conditions and incidental trends. By utilizing the least squares detrending methods, it is found that the initial condition plays...

This paper proposes new unit root tests for panels where the errors may be not only serial and/or cross- orrelated, but also unconditionally heteroskedastic. Despite their generality, the test statistics are shown to be very simple to implement, requiring only minimal corrections and still the...

Ng (2008) shows how the cross-sectional variance of the observed panel data can be used to construct a simple test for the proportion of non-stationary units. However, in the case with incidental trends the test is distorted. The present note shows how the distortions can be substantially...

The current paper considers the asymptotic local power of second-generation panel unit root tests that are robust to the presence of cross-section dependence in the form of common factors. As a basis for our analysis, we take the PANIC approach of Bai and Ng (2004, 2010), which is one of the...

This paper analyzes the properties of panel unit root tests based on recursively detrended data. The analysis is conducted while allowing for a (potentially) non-linear trend function, which represents a more general consideration than the current state of affairs with (at most) a linear trend....

In recent years many empirical studies of environmental Kuznets curves employing unit root and cointegration techniques have been conducted for both time series and panel data. When using such methods several issues arise: the effects of a short time dimension, in a panel context the effects of...

This paper evaluates the first-differenced maximum likelihood (FDML) and the continuously updating system generalized method of moments (CU-GMM) estimators of dynamic panel models when the data is close to non-stationary. This case is far from trivial, as a high degree of persistence is the norm...

First-differencing is generally taken to imply the loss of one observation, the first, or at least that the effect of ignoring this observation is asymptotically negligible. However, this is not always true, as in the case of GLS detrending. In order to illustrate this, the current paper...

This paper proposes a new unit root test that is general enough to accommodate a potentially non-linear deterministic trend function, making it one of the most general tests around. However, the main advantage lies with its simple implementation. In particular, the asymptotic critical values are...

This paper investigates the stationarity of the Federal Funds Rate. It contributes to the existing empirical literature in two ways. First, it explores both the presence of unit root and structural changes in the federal funds rate monthly data, by allowing for interaction between these two...