Very little is known about the local power of second generation panel unit root tests that are robust to cross-section dependence. This paper derives the local asymptotic power
functions of the CADF and CIPS tests of Pesaran (A Simple Panel Unit Root Test inPresence of Cross-Section Dependence, Journal of Applied Econometrics 22, 2007), which are among the most popular tests around.
Dynamic factor models have become very popular for analyzing high-dimensional time series, and are now standard tools in, for instance, business cycle analysis and forecasting. Despite their popularity, most statistical software do not provide these models within standard packages. We briefly review the literature and show how to estimate a dynamic factor model in EViews. A subroutine that estimates the model is provided. In a simulation study, the precision of the estimated factors are evaluated, and in an empirical example, the usefulness of the model is illustrated.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.