This paper considers various tests of the unit root hypothesis in panels where the cross-section dependence is due to common dynamic factors. Three situations are studied. First, the common factors ...

Due to weaknesses in traditional tests, a Bayesian approach is developed to investigate whether unit roots exist in macroeconomic time-series. Bayesian posterior odds comparing unit root models to ...

Download PDF More Formats on IMF eLibrary Order a Print Copy Create Citation This paper addresses a key puzzle in international finance: whether exchange rates follow a random walk or exhibit ...