The Power of PANIC
The current paper considers the asymptotic local power of second-generation panel unit root tests that are robust to the presence of cross-section dependence in the form of common factors. As a basis for our analysis, we take the PANIC approach of Bai and Ng (A PANIC Attack on Unit Roots and Cointegration, Econometrica 72, 1127–1177, 2004; Panel Unit Root Tests with Cross-Section Dependence: A Fur