Pesaran CD Test: Cross-Sectional Dependence Diagnostic for Panel Data

The Pesaran CD test is a general diagnostic procedure for detecting cross-sectional dependence in panel data models. Developed by M. Hashem Pesaran (2021), it is applicable to both balanced and unbalanced panels with large N and T, and retains validity under heterogeneous slope coefficients. The test is widely adopted in empirical economics, finance, and political economy as a prerequisite check before selecting appropriate estimators or unit-root tests for panel datasets.