Please use this identifier to cite or link to this item: http://buratest.brunel.ac.uk/handle/2438/969
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dc.contributor.authorCaporale, GM-
dc.contributor.authorCerrato, M-
dc.coverage.spatial42en
dc.date.accessioned2007-07-05T15:25:48Z-
dc.date.available2007-07-05T15:25:48Z-
dc.date.issued2004-
dc.identifier.citationEconomics and Finance Working papers, Brunel University, 04-18en
dc.identifier.urihttp://bura.brunel.ac.uk/handle/2438/969-
dc.description.abstractThis paper reviews recent developments in the analysis of non-stationary panels, focusing on empirical applications of panel unit root and cointegration tests in the context of PPP. It highlights various drawbacks of existing methods. First, unit root tests suffer from severe size distortions in the presence of negative moving average errors. Second, the common demeaning procedure to correct for the bias resulting from homogeneous cross-sectional dependence is not effective; more worryingly, it introduces cross-correlation when it is not already present. Third, standard corrections for the case of heterogeneous cross-sectional dependence do not generally produce consistent estimators. Fourth, if there is between-group correlation in the innovations, the SURE estimator is affected by similar problems to FGLS methods, and does not necessarily outperform OLS. Finally, cointegration between different groups in the panel could also be a source of size distortions. We offer some empirical guidelines to deal with these problems, but conclude that panel methods are unlikely to solve the PPP puzzleen
dc.format.extent459745 bytes-
dc.format.mimetypeapplication/pdf-
dc.language.isoen-
dc.publisherBrunel Universityen
dc.subjectPurchasing Power Parity (PPP), Panel Unit Root and Cointegrationen
dc.subjectTests, Cross-Sectional Dependenceen
dc.titlePanel Data Tests Of PPP: A Critical Overviewen
dc.typeResearch Paperen
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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