A Monte Carlo comparison of panel unit root tests under factor structure

Abstract

This article investigates and compares, through Monte Carlo experiments, the finite sample sizes and powers of the proposed ‘second-generation’ Panel Unit Root Tests (PUTs) under the strict and approximate factor structures, respectively.

Keywords:

• Panel Unit Root Tests
• cross-section dependence
• factor structure
• Monte Carlo

JEL Classification:

• C12
• C15
• C33

Acknowledgements

This study has been supported by the Fundamental Research Funds for the Central Universities and the Research Funds of Renmin University of China (grant no. 12XNK023).