An IV Test for a Unit Root in Generally Trending and Correlated Panels

This paper proposes an IV‐based panel unit root test that is general enough to accommodate general error serial and cross‐section dependence, and a potentially nonlinear deterministic trend function. These allowances make the new test one of the most general around. It is also very simple to implement. Indeed, the IV statistic is asymptotically invariant to not only to all nuisance parameters characterizing the dependence of the errors and the true trend function, but also the deterministic specification of the fitted test regression.