Series‐specific Unit Root Tests with Panel Data*

Breuer, Janice Boucher; McNown, Robert; Wallace, Myles S.

doi:10.1111/1468-0084.00276

Cited by 171 publications

(174 citation statements)

References 23 publications

(56 reference statements)

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“…The data are current account deficits expressed as a proportion of GDP. Following Breuer et al (2002), the critical values reported in the three columns on the right have been simulated with 10,000 replications where the error series were generated to be normally distributed with the variance-covariance matrix given by the SUR estimation. Each simulated current account deficit was then generated from the error series using the SUR estimated coefficients.…”

Section: Resultsmentioning

confidence: 99%

“…Most of these latter studies address the issue of heterogeneous lag structures and contemporaneous correlation of the residuals, but they still provide a single test statistic that does not allow the researcher to identify how many and which of the series in the panel are in fact stationary. This paper utilizes the alternative test procedure recently advocated by Breuer et al (2002) that exploits the power of panel data analysis without imposing uniformity across the panel under either the null or alternative hypothesis. This test relies on SUR analysis with no across panel restrictions under either hypothesis.…”

Section: )mentioning

confidence: 99%

“…In this study panel data unit root tests are applied to annual data on current account deficits. However, an additional novel approach of this paper is to employ a new test panel data unit root test, advocated by Breuer et al (2002), that estimates augmented Dickey-Fuller (ADF) regressions within a seemingly unrelated regression (SUR) framework in the search for current account stationarity. This SURADF test offers two crucial advantages over existing panel data unit root tests, such as the tests employed by Coakley et al (1999) and Wu (2000).…”

Section: Introductionmentioning

confidence: 99%

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Current Account Deficits in the Transition Economies

Holmes¹

2004

Prague Economic Papers

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Abstract:This study tests for the stationarity and sustainability of current account deficits for ten transition economies. For this purpose, a new test is employed that allows one to test for unit roots in heterogeneous panel datasets. While the benefits from creating a panel to overcome low test power are well known, this test also offers key advantages over existing alternative panel data unit root tests: it is able to identify which members within the panel are responsible for rejecting the null hypothesis of joint non-stationarity. In addition, the SU-RADF test does not presume disturbances that are independently and identically distributed. Using data covering 1993 -2001, this study finds strong evidence in favour of current account mean-reversion for six countries. Of the six countries in the sample that joined the European Union in May 2004, non-stationarity was confirmed in the case of Lithuania only.

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Section: Resultsmentioning

confidence: 99%

Section: )mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Current Account Deficits in the Transition Economies

Holmes¹

2004

Prague Economic Papers

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“…A similar methodology is developed by Breuer, McNown, and Wallace (2002). However, our approach provides for a more balanced view of the unit root hypothesis, because we assess various alternative formulations of the null-hypothesis in line with Flôres et al (1999).…”

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confidence: 99%

Purchasing power parity and the euro area

Koedijk¹,

Tims²,

Dijk³

2004

Journal of International Money and Finance

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This paper analyzes purchasing power parity (PPP) for the euro area. We study the impact of the introduction of the euro in 1999 on the behavior of real exchange rates. We test the PPP hypothesis for a panel of real exchange rates within the euro area over the period 1973-2003. Our methodology exploits the cross-sectional dependence across real exchange rates and allows for heterogeneity in the rates of mean reversion. We present evidence in favor of PPP for the full panel of real exchange rates, but we show that accounting for cross-country differences within the euro area is essential. The unit root hypothesis can be rejected for some real exchange rates, but evidence for PPP is weak for others. We also investigate PPP between the "synthetic" euro against several other major currencies over the period 1979-2003. We find support for the PPP hypothesis for the full panel of real exchange rates. When the restriction of a common mean reversion coefficient is relaxed, we reject the unit root hypothesis for the euroSwiss franc rate only. We conclude that the process of economic integration in Europe has accelerated convergence toward PPP within the euro area. This paper analyzes purchasing power parity (PPP) for the euro area. We study the impact of the introduction of the euro in 1999 on the behavior of real exchange rates. We test the PPP hypothesis for a panel of real exchange rates within the euro area over the period 1973-2003. Our methodology exploits the cross-sectional dependence across real exchange rates and allows for heterogeneity in the rates of mean reversion. We present evidence in favor of PPP for the full panel of real exchange rates, but we show that accounting for cross-country differences within the euro area is essential. The unit root hypothesis can be rejected for some real exchange rates, but evidence for PPP is weak for others. We also investigate PPP between the "synthetic" euro against several other major currencies over the period 1979-2003. We find support for the PPP hypothesis for the full panel of real exchange rates. When the restriction of a common mean reversion coefficient is relaxed, we reject the unit root hypothesis for the euro-Swiss franc rate only. We conclude that the process of economic integration in Europe has accelerated convergence toward PPP within the euro area. 5001-6182 Business. H\ZRUGVEuropean integration, real exchange rates, purchasing power parity, heterogeneous SUR

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“…These authors utilize conventional panel data stationarity techniques, as well as a series-specific stationarity technique; the seemingly unrelated regressions augmented Dickey-Fuller (SURADF) proposed by Breuer et al (2002), to examine the long-run PPP in these countries. Their dataset contains monthly real exchange rate series spanning the period 1980-2007.…”

Section: The Representative Literaturementioning

confidence: 99%