Likelihood Ratio Tests for a Unit Root in Panels with Random Effects
Because of the fixed heterogeneity of their models, most panel unit root tests impose restrictions on the rate at which the number of time periods, T, and the number of cross-section units, N, go to infinity. A common example of such a restriction isN/T→0, which in practice means that T≫N, a condition that is not always met. In the current paper the heterogeneity is given a parsimonious random eff