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Andrea Cerasa
''CIPS test for Unit Root in Panel Data: further Monte Carlo results''
( 2008, Vol. 3 No.16 )
This paper analyzes, through Monte Carlo experiments, the behaviour of Pesaran's CIPS test for the null of a unit root in panel data when (i) the assumption of a single common factor in the specification of the cross-section dependence is violated and (ii) the autoregressive order of the residuals is estimated. The simulation analysis points to the single common factor as a fundamental assumption for a suitable behaviour of the CIPS test and suggests that the test delivers the best performance when the truncation lag is estimated as a deterministic function of the sample size.
JEL: C2 - Single Equation Models; Single Variables: General
Manuscript Received : Jul 12 2007 Manuscript Accepted : Mar 19 2008

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