Unit Roots: Identification and Testing in Micro Panels

CEMMAP Working Paper No. CWP07/05

40 Pages Posted: 18 Jul 2005

See all articles by Stephen R. Bond

Stephen R. Bond

Nuffield College; Institute for Fiscal Studies (IFS)

Céline Nauges

National Institute for Agricultural Research (INRA) - Laboratoire d'Economie des Ressources Naturelles (LERNA)

Frank Windmeijer

University of Bristol - Department of Economics; University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO); Institute for Fiscal Studies (IFS) - Centre for Microdata Methods and Practice

Date Written: July 2005

Abstract

We consider a number of unit root tests for micro panels where the number of individuals is typically large, but the number of time periods is often very small. As we discuss, the presence of a unit root is closely related to the identification of parameters of interest in this context. Calculations of asymptotic local power and Monte Carlo evidence indicate that two simple t-tests based on ordinary least squares estimators perform particularly well.

Keywords: Generalised Method of Moments, Identification, Unit Root Tests

JEL Classification: C12, C23

Suggested Citation

Bond, Stephen R. and Nauges, Céline and Windmeijer, Frank, Unit Roots: Identification and Testing in Micro Panels (July 2005). CEMMAP Working Paper No. CWP07/05, Available at SSRN: https://ssrn.com/abstract=757316 or http://dx.doi.org/10.2139/ssrn.757316

Stephen R. Bond

Nuffield College ( email )

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Céline Nauges

National Institute for Agricultural Research (INRA) - Laboratoire d'Economie des Ressources Naturelles (LERNA) ( email )

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France

Frank Windmeijer (Contact Author)

University of Bristol - Department of Economics ( email )

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University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )

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Bristol BS8 1TN
United Kingdom

Institute for Fiscal Studies (IFS) - Centre for Microdata Methods and Practice

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