Testing for unit roots in panels in the presence of structural change with an application to OECD unemployment

Abstract

There has been extensive research on testing for unit roots in the presence of structural change and on testing for unit roots in panels. This chapter takes a small step towards combining the two research agendas.We propose a unit root test for non-trending data in the presence of a one-time change in the mean for a heterogeneous panel.The date of the break is determined endogenously.We perform simulations to investigate the power of the test,and apply the test to a data set of annual unemployment rates for 17 OECD countries from 1955 to 1990.

Citation

Murray, C.J. and Papell, D.H. (2001), "Testing for unit roots in panels in the presence of structural change with an application to OECD unemployment", Baltagi, B.H., Fomby, T.B. and Carter Hill, R. (Ed.) Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 223-238. https://doi.org/10.1016/S0731-9053(00)15008-X