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A wavelet-based panel unit-root test in the presence of an unknown structural break and cross-sectional dependency, with an application of purchasing power parity theory in developing countries
Karlstad University.
Jönköping University.
Jönköping University.
Linnaeus University, School of Business and Economics, Department of Economics and Statistics. Jönköping University. (Statistics)ORCID iD: 0000-0002-3416-5896
2017 (English)In: Applied Economics, ISSN 0003-6846, E-ISSN 1466-4283, Vol. 49, no 21, 2096-2105 p.Article in journal (Refereed) Published
Abstract [en]

This article introduces two different non-parametric wavelet-based panel unit-root tests in the presence of unknown structural breaks and cross-sectional dependencies in the data. These tests are compared with a previously suggested non-parametric wavelet test, the parameteric Im-Pesaran and Shin (IPS) testand a Wald type of test. The results from the Monte Carlo simulations clearly show that the new wavelet-ratio tests are superior to the traditional tests both interms of size and power in panel unit-root tests because of its robustness to cross-section dependency and structural breaks. Based on an empirical Central American panel application, we can, in contrast to previous research (where bias due to structural breaks is simply disregarded), find strong, clear-cut support for purchasing power parity (PPP) in this developing region.

Place, publisher, year, edition, pages
2017. Vol. 49, no 21, 2096-2105 p.
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-58929DOI: 10.1080/00036846.2016.1231908ISI: 000396793200005OAI: oai:DiVA.org:lnu-58929DiVA: diva2:1055069
Available from: 2016-12-11 Created: 2016-12-11 Last updated: 2017-05-22Bibliographically approved

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Shukur, Ghazi
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf