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st: panel unit root test t=4 / pooled estimation


From   Daniel Becker <daniel.becker@uni-rostock.de>
To   statalist@hsphsun2.harvard.edu
Subject   st: panel unit root test t=4 / pooled estimation
Date   Fri, 8 Aug 2008 19:31:15 +0200

Dear statalister,

maybe the question is a bit silly, but maybe someone has the time...

I have a panel with 74 cross-sectional observations and 4 year (1985,1990,1995,2000). I decided to ignore the time dimension and did a regression that includes dummies for the last three out of the four years.

However, "regress depvar year" and a scatter plot suggest that my dependent variable has a trend. So I thought that I should have a look at stationarity. But is this necessary if I am not making use of the time dimension anyway?

Secondly, while exploring several tests for unit roots, that most of time seem to reject the existence of a unit root, I started to think whether those test really are meaningful in my case. In the end, there are only 4 years in the panel. (And, in addition, I do not really know what an approbiate lag-length might be.)

So my questions are:

Is stationarity important if the estimation is done in a pooled panel?

Are panel unit-root tests valid if the time-dimension is very short?

Thanks for your help,

Daniel




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