Misleading Inferences from Panel Unit-Root Tests: A Comment
George S. Ford
Phoenix Center for Advanced Legal & Economic Public Policy Studies
Audrey D. Kline
University of Louisville College of Business
John D. Jackson
Auburn University - Department of Economics
May 16, 2011
Review of International Economics, Forthcoming
In an effort to resolve the "all or nothing" nature of panel unit root tests, Professors Boucher-Breuer, McNown and Wallace propose the SURADF test that can determine the mix of stationary and non-stationary series in a panel. We reveal a practical shortcoming of the test. Specifically, the results of the test appear to be highly sensitive to the selection of panel members. Since member selection is often driven by somewhat arbitrary rules such as missing data or membership in an organization, this sensitivity of the test is perhaps a significant shortcoming greatly limiting both its applicability and its generality.
Number of Pages in PDF File: 4
Keywords: Unit Root Tests, SURADF, Dickey Fuller, Panel Data
JEL Classification: C32, C33Accepted Paper Series
Date posted: August 23, 2006 ; Last revised: May 18, 2011
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