An Intersection Test for Panel Unit Roots

Abstract

This article proposes a new panel unit root test based on Simes’ (1986 Simes , R. J. ( 1986 ). An improvbonferroni procedure for multiple tests of significance . Biometrika 73 : 751 – 754 .[Crossref], [Web of Science ®] , [Google Scholar]) classical intersection test. The test is robust to general patterns of cross-sectional dependence and yet is straightforward to implement, only requiring p-values of time series unit root tests of the series in the panel, and no resampling. Monte Carlo experiments show good size and power properties relative to existing panel unit root tests. Unlike previously suggested tests, the new test allows to identify the units in the panel for which the alternative of stationarity can be said to hold. We provide an empirical application to real exchange rate data.