Panel unit-root tests with structural breaks

In this article, we introduce a new community-contributed command called xtbunitroot, which implements the panel-data unit-root tests developed by Karavias and Tzavalis (2014, Computational Statistics and Data Analysis 76: 391-407). These tests allow for one or two structural breaks in deterministic components of the series and can be seen as panel-data counterparts of the tests by Zivot and Andrews (1992, Journal of Business and Economic Statistics 10: 251-270) and Lumsdaine and Papell (1997, Review of Economics and Statistics 79: 212-218). The dates of the breaks can be known or unknown. The tests allow for intercepts and linear trends, nonnormal errors, and cross-section heteroskedasticity and dependence. They have power against homogeneous and heterogeneous alternatives and can be applied to panels with small or large time-series dimensions.

Automated summary

This article introduces a new community-contributed command called xtbunitroot, which implements the panel-data unit-root tests developed by Karavias and Tzavalis (2014). These tests allow for one or two structural breaks in the deterministic components of the series and can be applied to panels with small or large time-series dimensions.