A powerful wild bootstrap diagnosis of panel unit roots under linear trends and time-varying volatility

Herwartz, Helmut; Walle, Yabibal M.

doi:10.1007/s00180-017-0784-5

Cited by 3 publications

(3 citation statements)

References 43 publications

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“…Monte Carlo evidence also reveals that the inference based on PB and other existing estimators in the literature can su¤er from serious size distortions in …nite samples. To deal with these problems, we consider bootstrapping critical values using Wild bootstrap by Herwartz and Walle (2018) for more accurate and more robust inference that allows for arbitrary crosssectional dependence of errors. In addition, we also implement two bias-mitigation approaches -a simulation based and split-panel jackknife methods.…”

Section: Asymptotic Resultsmentioning

confidence: 99%

“…To improve accuracy of inference, and, importantly, to be able to conduct valid inference regardless of the degree of cross-sectional dependence of errors, we adopt the Wild bootstrap procedure used by Herwartz and Walle (2018). We found this procedure to be remarkably e¤ective for all four estimators, regardless of cross-sectional dependence of errors, and we therefore recommend using it in empirical research.…”

Section: Introductionmentioning

confidence: 99%

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Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels

Chudík¹,

Pesaran²,

Smith³

2023

gwp

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This paper, using the Bewley (1979) transformation of the autoregressive distributed lag model, proposes a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics, in the same setting as the widely used Pooled Mean Group (PMG) estimator. Asymptotic normality of the PB estimator is established, and Monte Carlo simulations reveal a good small sample performance of PB compared with existing estimators in the literature, namely PMG, PDOLS, and FMOLS. This paper also considers application of two bias-correction methods and a bootstrapping of critical values to conduct inference robust to cross-sectional dependence of errors. An empirical application to the aggregate consumption function taken from the original PMG paper illustrates the importance of the choice of individual estimators in practice.

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Section: Asymptotic Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels

Chudík¹,

Pesaran²,

Smith³

2023

gwp

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show abstract

“…Furthermore, it would be interesting to systematically compare the performance of Simes' test with other meta tests that are less reliable if the information to be combined is not independent. A feasible path to be followed is resampling, e.g., using the wild bootstrap procedure suggested by Herwartz and Walle (2018). Table A2.…”

Section: Discussionmentioning

confidence: 99%

On Combining Evidence from Heteroskedasticity Robust Panel Unit Root Tests in Pooled Regressions

Arnold

Hanck

2019

JRFM

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Volatility break robust panel unit root tests (PURTs) recently proposed by Herwartz and Siedenburg (Computational Statistics & Data Analysis 2008, 53, 137–150) and Demetrescu and Hanck (Econometrics Letters 2012, 117, 10–13) have different performances under both the null and local alternatives. Common practice in empirical research is to apply multiple tests if none is uniformly superior. We show that this approach tends to produce contradictory evidence for the tests considered, making it unclear whether to reject the null. To address this problem, we advocate a combined testing procedure. Simulation evidence shows that the combined test has good size control and closely tracks the more powerful test. An empirical application reinvestigates whether there is a unit root in OECD inflation rates. We find evidence that inflation is stationary for long observation periods, but we cannot reject nonstationarity in most subsets of countries for the last three decades.

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Forward detrending for heteroskedasticity-robust panel unit root testing

Herwartz

Maxand

Walle

2022

Econometric Reviews

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simulation results for alternative random but bounded initial values y 0 = O p (1) are documented in Table B.2. The case considered is that of cross-sectionally independent panels. Three main patterns emerge from these results. First, size of the tests remains qualitatively the same in all the initial value scenarios considered. Second, power results are also similar. Unsurprisingly, less favorable power results (e.g. for T = 25, 50) obtain if initial values are drawn from distributions characterized by relatively high variation (e.g. discarding 50 presample values; setting κ = 1 in the design of Madsen ( 2010)). Third, while power outcomes are similar in relative terms for homoskedastic and variance break models, actual power estimates are sensitive to both location and direction of variance breaks.

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A powerful wild bootstrap diagnosis of panel unit roots under linear trends and time-varying volatility

Cited by 3 publications

References 43 publications

Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels

Pooled Bewley Estimator of Long-Run Relationships in Dynamic Heterogenous Panels

On Combining Evidence from Heteroskedasticity Robust Panel Unit Root Tests in Pooled Regressions

Forward detrending for heteroskedasticity-robust panel unit root testing

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