Testing for a unit root in panels with dynamic factors

Moon, Hyungsik Roger; Perron, Bernard

doi:10.1016/j.jeconom.2003.10.020

Cited by 772 publications

(612 citation statements)

References 27 publications

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“…If cross-sectional dependence cannot be rejected, we apply three different second generation PURTs: the Cross-sectionally ADF (CADF) of Pesaran (2007), the Cross-sectional augmented IPS (CIPS) proposed by Pesaran (2007) and the MP test proposed by Moon and Perron (2004). All these tests have in common the assumption of cross-sectional correlation due to the presence of unknown common factors (e.g.…”

Section: Accounting For Cross-country Dependencementioning

confidence: 99%

“…Both tests have as null hypothesis homogeneous unit root (all individuals within a panel data are non-stationary) versus the alternative that at least one individual in the panel is stationary. Moon and Perron (2004) develop a factor model test with two modified t-statistics with standard normal distribution for the null hypothesis of a unit root H 0 : δ i = 1 i = 1,...,N which is tested against the heterogeneous H 1 : δ i < 1 for some i. The test assumes that the error term follows a K-unobserved-common factors model to which an idiosyncratic shock is added.…”

Section: Accounting For Cross-country Dependencementioning

confidence: 99%

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Economic growth and carbon dioxide emissions: An analysis of Latin America and the Caribbean

Jardón

Kuik

Tol

2017

Atm

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RESUMENEn este trabajo se analiza la relación empírica entre las emisiones de dióxido de carbono (CO 2 ) per cápita y el crecimiento económico en un panel de 20 países de América Latina y el Caribe durante el periodo 1971-2011. Dicha relación empírica, conocida en la literatura económica como la hipótesis de la curva de Kuznets ambiental (CKA), sugiere que la relación entre ambas variables tiene en el largo plazo una relación funcional en forma de U-invertida, es decir, a partir de cierto nivel de renta per cápita, un mayor crecimiento económico iría acompañado de mejoras en la calidad ambiental. Si bien esta hipótesis ha sido estudiada desde la década de 1990, recientemente su validez empírica ha sido cuestionada, entre otras cosas, por la falta de análisis de estacionariedad de las variables, y en un contexto de datos panel, la presencia de dependencia cruzada. Tomando en cuenta ambas críticas, empleamos novedosas pruebas de raíces unitarias y técnicas de cointegración robustas para la presencia de dependencia en el panel. Encontramos resultados contradictorios dependiendo del supuesto de dependencia cruzada entre los países. Bajo el supuesto de independencia cruzada, se confirma la existencia de una CKA con puntos de quiebre realistas. Sin embargo, dicho supuesto es rechazado posteriormente, concluyendo así que en presencia de dependencia cruzada en el panel, no se puede establecer una relación de equilibrio a largo plazo entre las variables, i.e., se rechaza la existencia de una CKA. ABSTRACTThis paper analyzes the empirical relationship between carbon dioxide (CO 2 ) emissions per-capita and economic growth in a panel of 20 Latin American and Caribbean countries over the period 1971-2011. This empirical relationship, known in the economic literature as the Environmental Kuznets Curve (EKC) hypothesis, suggests that the relationship between these variables, in the long run, follows an inverse U-shape, that is, from a certain level of per-capita income, an increased economic growth would be accompanied by improvements in environmental quality. Although this hypothesis has been studied since the 1990s, its empirical validity has recently been questioned on the basis of, among other things, the lack of diagnosis of the stationarity properties of the variables, and in a panel data context, the presence of cross-sectional dependence. Taking into account both criticisms, we use recent unit root tests and cointegration techniques that are robust to the presence of cross-sectional dependence. We find contradictory results depending on the assumption of cross-dependence. Under the assumption of cross-independence, the existence of an EKC with a realistic turning point is confirmed. However, this assumption is subsequently rejected, and because of the presence of cross-dependence in the panel, a long-run equilibrium relationship between the variables cannot be established, and we reject the existence of an EKC.

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Section: Accounting For Cross-country Dependencementioning

confidence: 99%

Section: Accounting For Cross-country Dependencementioning

confidence: 99%

Economic growth and carbon dioxide emissions: An analysis of Latin America and the Caribbean

Jardón

Kuik

Tol

2017

Atm

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“…Modern panel analyses of cointegration and stationarity have been implemented, for instance, by Rault (2007, 2008), Prohl and Schneider (2006), Westerlund and Prohl (2010) and Afonso and Jalles (2012). Afonso and Rault (2007) emphasize that the common panel methods of testing integration are (i) fi rst generation panel unit root tests, that assume cross-country independence among panel units except for common time effects (Breitung, 2000;Hadri, 2000;Levin, Lin, Chu, 2002;Im, Pesaran, Shin, 2003), (ii) second generation panel unit root tests allowing for cross-country dependence, by Moon and Perron (2004), Choi (2006), (iii) panel unit root test allowing for structural breaks (Im, Lee, 2001) based on the Lagrange multiplier.…”

Section: Panel Tests Of Sustainabilitymentioning

confidence: 99%

“…The panel model application of cross-sectional dependence is now developing in the modern literature. The most common tests, testing the sustainability of public fi nances under conditions of cross-sectional dependence, are those proposed by Phillips and Sul (2003), Bai and Ng (2004), Smith, Leybourne and Kim (2004), Moon and Perron (2004), Choi (2006), andPesaran (2007).…”

Section: Panel Tests Of Sustainabilitymentioning

confidence: 99%

Fiscal Sustainability in Central and Eastern European Countries - A Post-Crisis Assessment

Krajewski¹,

Mackiewicz²,

Szymańska³

2016

Prague Economic Papers

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The aim of this paper is to investigate public fi nance sustainability for a selected group of ten Central and Eastern European countries. In order to assess the fi scal sustainability of these countries we extend standard analyses typically used for developed countries to our group of ten CEE countries. To assess fi scal sustainability we use panel stationarity and cointegration tests, as well as estimates of certain parameters of fi scal reaction functions. Our research shows that despite the fi nancial turmoil, CEE countries demonstrate the existence of a long-term relationship between revenues and expenditures and they have statistically relevant parameters of the fi scal reaction function. This indicates that the public fi nances in CEE countries are sustainable despite the crisis. However, the analysed group of countries shows sustainability only in a weak sense, which may pose a threat to public fi nances in the future.

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“…This investigation can be done via unit root test. The panel unit root tests can be found in Im et al (2003), Lin (1992, 1993), Levin et al (2002), Bai and Ng (2004), Philips and Sul (2003), Moon and Perron (2004), Pesaran (2007) and Choi (2001Choi ( , 2002. Hurlin (2010) distinguished two generations of unit root tests on which the first generation tests relied on the assumption that all cross sectional units are independent.…”

Section: Introductionmentioning

confidence: 99%

A Robust Panel Unit Root Test in the Presence of Cross Sectional Dependence

Shariff

Hamzah

2015

J. Mod. App. Stat. Meth.

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Problems arise in testing the stationarity of the panel in the presence of cross sectional dependence and outliers. The currently available panel unit root tests are very much affected by the presence of outliers. As such, this article introduces an alternative test which is robust to outliers and cross sectional dependence. The performance and robustness of the proposed test is discussed and comparisons are made to the existing tests via simulation studies.

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Testing for a unit root in panels with dynamic factors

Cited by 772 publications

References 27 publications

Economic growth and carbon dioxide emissions: An analysis of Latin America and the Caribbean

Economic growth and carbon dioxide emissions: An analysis of Latin America and the Caribbean

Fiscal Sustainability in Central and Eastern European Countries - A Post-Crisis Assessment

A Robust Panel Unit Root Test in the Presence of Cross Sectional Dependence

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