PANIC in the Presence of Uncertainty about the Deterministic Trend

• Autores: Joakim Westerlund, Johan Blomquist
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 75, Nº. 1, 2013 (Ejemplar dedicado a: Large Data Sets), págs. 123-135
• Idioma: inglés
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• Resumen

  • Most macroeconomic and financial panel variables are trending. However, because of the well-known power problem in the presence of incidental trends, many researchers gamble that their unit root test regressions can be ran without such trends, thereby running the risk of obtaining spurious results. This article takes one of the most general and popular panel unit root tests, known as PANIC, and shows how it can be modified to account for the uncertainty regarding the deterministic trend.