Panel Seasonal Unit Root Test: Further Simulation Results and An Application to Unemployment Data |
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Authors: | Christian Dreger and Hans-Eggert Reimers |
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Affiliation: | (1) Institute of Economic Research, Kleine M?rkerstr. 8, D—06017 Halle;(2) Hochschule Wismar, University of Technology, Business and Design, 12 10, D—23952 Wismar |
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Abstract: | Summary: In this paper the seasonal unit root test of Hylleberg et al. (1990) is generalized to cover a heterogenous panel. The procedure follows the work of Im, Pesaran and Shin (2002) and is
independently proposed by Otero et al. (2004). Test statistics are given and critical values are obtained by simulation. Moreover, the properties of the tests are
analyzed for different deterministic and dynamic specifications. Evidence is presented that for a small time series dimension
the power is low even for increasing cross section dimension. Therefore, it seems necessary to have a higher time series dimension
than cross section dimension. The test is applied to unemployment data in industrialized countries. In some cases seasonal
unit roots are detected. However, the null hypotheses of panel seasonal unit roots are rejected. The null hypothesis of a
unit root at the zero frequency is not rejected, thereby supporting the presence of hysteresis effects.
* The research of this paper was supported by the Deutsche Forschungsgemeinschaft. The paper was presented at the workshop
“Unit roots and cointegration in panel data” in Frankfurt, October 2004 and in the poster-session at the EC2 meeting in Marseille,
December 2004. We are grateful to the participants of the workshops and an anonymous referee for their helpful comments. |
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Keywords: | Panel seasonal unit root test IPS-approach unemployment data JEL C22 C23 |
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