New panel unit root test improves accuracy of economic trend predictions.
The article introduces new tests to check if economic data trends are stable over time. These tests use information about shared factors among different data sets. The tests were found to work well in small samples and showed accurate results in various scenarios. The more data and time points used, the better the tests performed. The new CSB test was especially effective with smaller data sets. The tests were applied to real interest rates and equity prices in different countries to demonstrate their usefulness.