Truncated Product Methods for Panel Unit Root Tests

• Autores: Xuguang Sheng, Jingyun Yang
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 75, Nº. 4, 2013, págs. 624-636
• Idioma: inglés
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• Resumen

  • This paper proposes two new panel unit root tests based on Zaykin et al. (2002)’s truncated product method. The first one assumes constant correlation between P-values and the second one uses sieve bootstrap to allow for general forms of cross-section dependence in the panel units. Monte Carlo simulation shows that both tests have reasonably good size and are powerful in cases of some very large P-values. The proposed tests are applied to a panel of real GDP and inflation density forecasts, resulting in evidence that professional forecasters may not update their forecast precision in an optimal Bayesian way.