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Quantile unit root inference for panel data with common shocks

Author

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  • Yang, Jisheng
  • Wei, Jinbao
  • Cai, Biqing

Abstract

This paper proposes new quantile unit root tests for panel data with common shocks, whose critical values can be simulated based on our asymptotic theory. The Monte Carlo simulation results indicate that our tests perform well in finite sample. An application for real effective exchange rates (REERs) suggests that the Purchasing Power Parity (PPP) hypothesis holds for higher quantiles but does not hold for lower ones, and the asymmetric dynamics of REERs provide a plausible explanation for the PPP puzzle.

Suggested Citation

  • Yang, Jisheng & Wei, Jinbao & Cai, Biqing, 2022. "Quantile unit root inference for panel data with common shocks," Economics Letters, Elsevier, vol. 219(C).
    • Handle: RePEc:eee:ecolet:v:219:y:2022:i:c:s0165176522002968
    DOI: 10.1016/j.econlet.2022.110809
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    References listed on IDEAS

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    Cited by:

    1. Feng, Hao, 2023. "Testing for explosive bubbles in the presence of non-Gaussian conditions," Economics Letters, Elsevier, vol. 233(C).

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    More about this item

    Keywords

    Common shocks; Panel data; Purchasing power parity; Quantile regression; Unit root test;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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