Document Type

Working Paper


Summer 7-2014


Panel Data, Generalized Least Squares, Time Trend Model, Fixed Effects, First Difference, and Nonstationarity




Working Papers Series


Analysis | Econometrics | Economics | Mathematics


This paper studies test of hypotheses for the slope parameter in a linear time trend panel data model with serially correlated error component disturbances. We propose a test statistic that uses a bias corrected estimator of the serial correlation parameter. The proposed test statistic which is based on the corresponding fixed effects feasible generalized least squares (FE-FGLS) estimator of the slope parameter has the standard normal limiting distribution which is valid whether the remainder error is I(0) or I(1). This performs well in Monte Carlo experiments and is recommended.

Additional Information

Working paper no. 170

Authors dedicate this paper in honor of Peter C.B. Phillips' many contributions to econometrics and in particular non-stationary time series analysis and panel data. They would like to thank an anonymous referee and the editor Tom Fomby for their helpful suggestions.

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Creative Commons Attribution 3.0 License
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