New Panel Analysis Reveals Hidden Non-Stationarity Impacting Economic Stability
The article discusses new methods for analyzing non-stationary panel data, focusing on cointegration and unit root analysis. By considering cross-section dependence, the researchers found that traditional methods may lead to incorrect conclusions. They introduced a factor structure approach to address this issue. Their tests showed that real per capita GDP in OECD countries is I(1) non-stationary, despite appearing I(0) stationary at first glance.