The unit root test consists of testing the null hypothesis in (1.4) which is the panel data equivalent of an augmented Dickey-Fuller test. The t-ratio is distributed normally under the null hypothesis of a unit root. Note that these estimates are done using OLS ignoring the fixed effects.
We can again correct for fixed effects by subtracting the initial observation, from the lagged level.
in (1.4) which is the panel data equivalent of an augmented Dickey-Fuller test. The t-ratio is distributed normally under the null hypothesis of a unit root. Note that these estimates are done using OLS ignoring the fixed effects.
from the lagged level.
