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The Local Power of the CADF and CIPS Panel Unit Root Tests |
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| Authors: | Joakim Westerlund Mehdi Hosseinkouchack Martin Solberger |
| Affiliation: | 1. Department of Economics, Lund University, Lund, Sweden;2. Financial Econometrics Group, Centre for Research in Economics and Financial Econometrics, Deakin University;3. Goethe University Frankfurt, Germany;4. Uppsala University, Uppsala, Sweden |
| Abstract: | Very little is known about the local power of second generation panel unit root tests that are robust to cross-section dependence. This article derives the local asymptotic power functions of the cross-section argumented Dickey–Fuller Cross-section Augmented Dickey-Fuller (CADF) and CIPS tests of Pesaran (2007), which are among the most popular tests around. |
| Keywords: | Common factor model Cross-sectional averages Cross-sectional dependence Local asymptotic power Panel unit root test |