Time-specific disturbances and cross-sectional dependency in a small-sample heterogeneous panel data unit root test
In their seminal work, Im et al. (1997, 2003) suggested that time series for several cross-sectional units could be used to increase the power of the Dickey-Fuller unit root test. They argued that when cross-sectional correlation is a problem that can be modelled by a time-specific factor, demeaning across the cross-sectional units can solve the problem. In this study, this proposition is proven v