Adina Tarcolea // Johann Wolfgang Goethe-Universität Frankfurt
Testing for Stationarity in Large Cross-Dependent Panels with US Evidence on Unit Labor Cost
Research SeminareA new stationarity test for heterogenous panel data with large cross-sectional dimension is developed and used to examine the growth rates of unit labour cost for 51 US states. The test allows for persistent cross-unit dependence in the form of unbounded long-run correlation matrices, for which a simple parameterization is proposed. A KPSS type distribution results asymptotically, if T and N converge to infinity sequentially (T first, followed by N). Some evidence against stationarity (short memory) is found for the examined series.
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