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Testing for stationarity in large panels with cross-dependence, and US evidence on unit labor cost

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  • Matei Demetrescu
  • Uwe Hassler
  • Adina Tarcolea

Abstract

A new stationarity test for heterogeneous panel data with large cross-sectional dimension is developed and used to examine a panel with growth rates of unit labor cost in the USA. The test allows for strong 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 letting T→∞ be followed by N→∞. Some evidence against stationarity (short memory) is found for the examined series.

Suggested Citation

  • Matei Demetrescu & Uwe Hassler & Adina Tarcolea, 2010. "Testing for stationarity in large panels with cross-dependence, and US evidence on unit labor cost," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(8), pages 1381-1397.
    • Handle: RePEc:taf:japsta:v:37:y:2010:i:8:p:1381-1397
    DOI: 10.1080/02664760903038398
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