For dynamic panel models with cross-sectional dependence, several unit root tests are constructed using a Huber-type instrument, whose null asymptotics are standard Gaussian and do not depend on nuisance parameters. A Monte-Carlo simulation shows that the proposed tests have better sizes and comparable powers relative to other two existing tests developed for cross-sectionally dependent dynamic panel models.
Bibliographical noteFunding Information:
The authors are very grateful for two referees for many helpful comments. This research is supported by a Grant from Korea Research Foundation (Grant #: KRF-2004-042-C00017).
- Cross-sectional dependence
- Gaussian asymptotics
- Instrumental variable estimation
- Unit root test