The asymptotic distribution of the CADF unit root test in the presence of heterogeneous AR(p) errors

The CADF test of Pesaran (J Appl Econ 22:265–312, 2007) are among the most popular univariate tests for cross-section correlated panels around. Yet, the existing asymptotic analysis of this test statistic is limited to a model in which the errors are assumed to follow a simple AR(1) structure with homogenous autoregressive coefficients. One reason for this is that the model involves an intricate identification issue, as both the serial and cross-section correlation structures of the errors are unobserved. The purpose of the current paper is to tackle this issue and in so doing extend the existing analysis to the case of AR((Formula presented.)) errors with possibly heterogeneous coefficients.

A factor analytical method to interactive effects dynamic panel models with or without unit root

In a recent study, Bai (Fixed-Effects Dynamic Panel Models, A Factor Analytical Method. Econometrica 81, 285-314, 2013a) proposes a new factor analytic (FA) method to the estimation of dynamic panel data models, which has the unique and very useful property that it is completely bias-free. However, while certainly appealing, it is restricted to fixed effects models without a unit root. In many situations of practical relevance this is a rather restrictive consideration. The purpose of the current study is therefore to extend the FA approach to cover models with multiple interactive effects and a possible unit root.

Pooled panel unit root tests and the effect of past initialization

This paper analyzes the role of initialization when testing for a unit root in panel data, an issue that has received surprisingly little attention in the literature. In fact, most studies assume that the initial value is either zero or bounded. As a response to this, the current paper considers a model in which the initialization is in the past, which is shown to have several distinctive features that makes it attractive, even in comparison to the common time series practice of making the initial value a draw from its unconditional distribution under the stationary alternative. The results have implications not only for theory, but also for applied work. In particular, and in contrast to the time series case, in panels the effect of the initialization need not be negative but can actually lead to improved test performance.

A note on the pooling of individual panic unit root tests

One of the most cited studies in recent years within the field of nonstationary panel data analysis is that of Bai and Ng (2004), in which the authors propose PANIC, a new framework for analyzing the nonstationarity of panels with idiosyncratic and common components. The problem is that the asymptotic validity of PANIC as a platform for constructing pooled panel unit root tests based on averaging is not fully proven. This paper provides the required results, whose usefulness is verified through simulations. © 2009 Cambridge University Press.

Pooled unit root tests in panels with a common factor

This paper proposes new pooled panel unit root tests that are appropriate when the data exhibit cross-sectional dependence that is generated by a single common factor. Using sequential limit arguments, we show that the tests have a limiting normal distribution that is free of nuisance parameters and that they are unbiased against heterogenous local alternatives. Our Monte Carlo results indicate that the tests perform well in comparison to other popular tests that also presumes a common factor structure for the cross-sectional dependence.

Is there really a unit root in the inflation rate? More evidence from panel data models

Time series unit root evidence suggests that inflation is nonstationary. By contrast, when using more powerful panel unit root tests, Culver and Papell (1997) find that inflation is stationary. In this article, we test the robustness of this result by applying a battery of recent panel unit root tests. The results suggest that the stationarity of inflation holds even after controlling for cross-sectional dependence and structural change.

The local power of the CADF and CIPS panel unit root tests

Very little is known about the local power of second generation panel unit root tests that are robust to cross-section dependence. This article derives the local asymptotic power functions of the cross-section argumented Dickey–Fuller Cross-section Augmented Dickey-Fuller (CADF) and CIPS tests of Pesaran (2007), which are among the most popular tests around.

Induction and quantification of secondary metabolites in mycorrhized root cultures

 The research has made significant addition to the knowledge of the role of mycorrhizas as an elicitor for the production of secondary metabolites in three plant species along with extraction techniques that have paved the way for a feasible method of continuous supply of secondary metabolites while maintaining viability.