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Panel unit root tests and spatial dependence

Author

Listed:
  • Georges Bresson

    (Ermes (CNRS), Université Paris II, France)

  • Badi H. Baltagi

    (Department of Economics, Syracuse University, New York, USA)

  • Alain Pirotte

    (Ermes (CNRS), Université Paris II, France)

Abstract
This paper studies the performance of panel unit root tests when spatial effects are present that account for cross-section correlation. Monte Carlo simulations show that there can be considerable size distortions in panel unit root tests when the true specification exhibits spatial error correlation. These tests are applied to a panel data set on net real income from the 1000 largest French communes observed over the period 1985-1998. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Georges Bresson & Badi H. Baltagi & Alain Pirotte, 2007. "Panel unit root tests and spatial dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 339-360.
    • Handle: RePEc:jae:japmet:v:22:y:2007:i:2:p:339-360
    DOI: 10.1002/jae.950
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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