Misleading Inferences from Panel Unit-Root Tests: A Comment

4 Pages Posted: 23 Aug 2006 Last revised: 18 May 2011

See all articles by George S. Ford

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

Multiple version iconThere are 3 versions of this paper

Date Written: May 16, 2011

Abstract

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.

Keywords: Unit Root Tests, SURADF, Dickey Fuller, Panel Data

JEL Classification: C32, C33

Suggested Citation

Ford, George S. and Kline, Audrey D. and Jackson, John Douglas, Misleading Inferences from Panel Unit-Root Tests: A Comment (May 16, 2011). Review of International Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=925957

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Audrey D. Kline

University of Louisville College of Business ( email )

Louisville, KY 40292
United States
502-852-4839 (Phone)
502-852-7557 (Fax)

HOME PAGE: http://business.louisville.edu

John Douglas Jackson

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

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