Panel LM unit root tests with level and trend shifts |
| |
Institution: | 1. Çankaya University, Department of Banking and Finance, Eskisehir Yolu 29 km., Ankara, Turkey;2. Gazi University, Faculty of Economic and Administrative Sciences, Department of Econometrics, 06500 Ankara, Turkey |
| |
Abstract: | This paper considers a Lagrange multiplier (LM) based panel unit root test that allows for heterogeneous structural breaks in both the intercepts and slopes of a series. We note that many popular time series variables are likely to exhibit changing means and/or trends over time. Given that the usual tests will depend on the nuisance parameters indicating the locations of the trend breaks, we adopt a transformation procedure that makes our new panel unit root tests invariant to the nuisance parameters. To illustrate the importance of the power gain provided by our test, we examine the convergence hypothesis using relative ratios of per capita health care expenditures in 20 OECD countries. Our results provide evidence that the convergence hypothesis is supported. |
| |
Keywords: | Panel unit root tests LM test Structural breaks Trend breaks C12 C15 C22 |
本文献已被 ScienceDirect 等数据库收录! |
|