This paper presents a response surface analysis for the …nite sample distributions of two popular panel unit root tests developed by Chang (2002) and Chang and Song (2005). Numerical distributions illustrate signi…cant di¤erences between …nite sample and large sample properties. Dependence of …nite sample bias on sample size is investigated. The paper provides 95% con…dence intervals for the cr...

We investigate for 26 OECD economies if their current account imbalances are driven by stochastic trends. Standard ADF results are contrasted with tests accounting for the bounded support of the current account. Neglecting the latter feature might give misleading results in the sense that ADF based conclusions are biased towards the rejection of unit root features. The current account imbalance...

The effectiveness of an orthogonal to backward mean transformation is investigated in the context a non-stationary panel data model. It shown that corresponding estimator as efficient Transformed Maximum Likelihood when autoregressive parameter equal unity. Furthermore, recently introduced bias-corrected version almost Pooled Least Squares estimator.