Whether to check the First-gen or Second-gen Unit Root for a cross-sectionally dependent but Unbalanced Panel dataset?

04 October 2021 1 5K Report

It is suggested to use the second-generation test for a Balanced dataset to overcomes the shortcoming of cross-sectional dependence. Now, what if the dataset is unbalanced along with the mentioned shortcoming?

Thanks in advance.

Qamar Ul Islam

Dear Tarik Aziz

The second generation of panel unit root tests aims to overcome the shortcoming of cross-sectional dependence in the first-generation tests. With regards to this, all the tests except for the Bai and Ng (2005) and Harris et al. (2005) assume that there is a unit root in the data.

Kind Regards

Qamar Ul Islam

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