English, Article, Journal or magazine article edition: Stability tests for heterogeneous panel data. Felix Chan; Tommaso Mancini-Griffoli; Laurent L. Pauwels

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Bookmark: http://trove.nla.gov.au/version/44557
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Stability Tests for Heterogeneous Panel Data
Author
  • Felix Chan
  • Tommaso Mancini-Griffoli
  • Laurent L. Pauwels
Physical Description
  • preprint
Notes
  • This paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some - and not all - individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.
  • RePEc:pse:psecon:2006-49
  • This paper proposes a new test for structural stability in panels by extending the testing procedure proposed in the seminal work of Andrews (2003) originally developed for time series. The test is robust to non-normal, heteroskedastic and serially correlated errors, and, importantly, allows for the number of post break observations to be small. Moreover, the test accommodates the possibility of a break affecting only some - and not all - individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the cross sectional dimension of panel data. This greatly facilitates the calculation of critical values with respect to the test's time series counterpart. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. Finally, the test is illustrated in practice, in a brief study of the euro's effect on trade.
  • Structural Change, Instability, Cross Sectionally Dependent Errors, Heterogeneous Panels, Monte Carlo, Euro Effect on Trade
  • RePEc:hkm:wpaper:092008
Language
  • English
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