Block bootstrapping for a panel mean break test

Abstract

We consider block bootstrappings for panel mean change test of the squared CUSUM test of Horvath and Huskova (J Time Ser Anal 33:631-648, 2012): the circular block bootstrapping and stationary bootstrapping. First order asymptotic null validity of the test is proved under serial and/or cross-sectional correlation. Consistency of the test under an alternative hypothesis is also proved. A Monte-Carlo experiment reveals that the existing tests of Horvath and Huskova (2012) and others have severe size distortions for serially and/or cross-sectionally correlated panels, and the block bootstrappings remedy this size distortion problem. A real data analysis illustrates the proposed method.