Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed
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In this paper, we propose new cointegration tests for single equations and panels. Inboth cases, the asymptotic distributions of the tests, which are derived with N fixed andT → ∞, are shown to be standard normals. The effects of serial correlation and crosssectionaldependence are mopped out via long-run variances. An effective bias correctionis derived which is shown to work well in finite samples; particularly when N is smallerthan T. Our panel tests are robust to possible cointegration across units.
- cointegration, panel cointegration, cross-section dependence, bias correction, DOLS, FCLT.