This supplement provides proofs of the main theoretical results in Pesaran, Smith and Yagamata (2012, PSY) for the case of models with linear trends, and models with intercepts and serially correlated idiosyncratic errors. It also provides theoretical results for the cross sectionally augmented Sargan-Bhargava statistics, gives the details of a number of di¤erent panel unit root tests used in t...

a r t i c l e i n f o JEL Classification: C22 F31 Keywords: Purchasing power parity Real effective exchange rate Transition countries Sequential Panel Selection Method Panel KSS unit root test Fourier function Policy implications This study applies the Sequential Panel Selection Method (SPSM), proposed by Chortareas and Kapetanios (2009) to test the validity of long-run purchasing power parity ...

This paper re-examines the stationarity of national health care expenditures and GDP in a panel setting utilizing data from 20 OECD countries over the period from 1960 to 1997. Previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust. We advance the literature by utilizing a...

We combined recent developments in univariate and multivariate unit root testing in order to construct a more-powerful panel unit root test. We extended the GLS-detrending procedure of Elliott, Rothenberg, and Stock (1996) to a panel Augmented Dickey-Fuller test. The finite sample power properties of the new test demonstrate a very large gain when compared to existing tests, especially for smal...

By disaggregating price indices, it becomes apparent that the real exchange rate consists of the real exchange rate for a single good and a weighted sum of relative prices between goods. When applying a battery of panel unit root tests to this sum and its components, it is found that both the sum and the relative prices are non-stationary. This implies that PPP is invalid even if the LOP holds ...

International visitor arrivals to Bali are examined using univariate and panel Lagrange Multiplier (LM) unit root tests with one and two structural breaks to ascertain if shocks to the time path of tourist arrivals are permanent or transitory. The univariate LM unit root tests with one and two structural breaks fail to reject the null hypothesis of a unit root in international visitor arrivals ...

There is a large and growing literature that investigates evidence for mean reversion in stock prices. Empirically, there is no consensus as to whether stock prices are mean reverting or random walk processes; at best, the results are mixed. In this paper, we provide further evidence on the mean reversion hypothesis for seventeen European countries using the Levin and Lin (1992), seemingly unre...