Unit Root Testing Using Modified Wild Bootstrap Methods

• Activity Number: 489
• Type: Contributed
• Date/Time: Wednesday, August 7, 2013 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Jean-Pierre Urbain*+ and Stephan Smeekes
• Companies: Maastricht University and Maastricht University
• Keywords: unit root test ; wild bootstrap ; nonstationary volatility ; panel data

Abstract

In this paper we consider several modified wild bootstrap methods in order to test for unit roots in a possibly multivariate framework. The wild bootstrap methods are modified in the sense that they can capture dependence over time as well as heteroskedasticity, making them attractive in the unit root testing framework. We apply the methods to panel unit root testing where the modified wild bootstrap methods provide a simple way to take heteroskedasticity, autocorrelation and cross-sectional dependence into account simultaneously. We derive the asymptotic properties of the methods, show their first order asymptotic validity and perform a simulation study to evaluate their small sample properties.