On the breitung test for panel unit roots and local asymptotic power

H. R. Moon, B. Perron, P. C.B. Phillips

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

This note analyzes the local asymptotic power properties of a test proposed by Breitung (2000, in B. Baltagi (ed.), Nonstationary Panels, Panel Cointegration, and Dynamic Panels). We demonstrate that the Breitung test, like many other tests (including point optimal tests) for panel unit roots in the presence of incidental trends, has nontrivial power in neighborhoods that shrink toward the null hypothesis at the rate of n-1/4T-1 where n and T are the cross-section and time-series dimensions, respectively. This rate is slower than the n-1/2T-1 rate claimed by Breitung. Simulation evidence documents the usefulness of the asymptotic approximations given here.

Original languageEnglish
Pages (from-to)1179-1190
Number of pages12
JournalEconometric Theory
Volume22
Issue number6
DOIs
Publication statusPublished - 2006 Dec

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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