Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed

Kaddour Hadri; Eiji Kurozumi; Yao Rao

doi:10.1111/ectj.12054

Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed

Kaddour Hadri, Eiji Kurozumi, Yao Rao

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Abstract

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.

Original language	English
Pages (from-to)	363-411
Journal	Econometrics Journal
Volume	18
Issue number	3
Early online date	14 Jul 2015
DOIs	https://doi.org/10.1111/ectj.12054
Publication status	Published - Oct 2015

Keywords

cointegration, panel cointegration, cross-section dependence, bias correction, DOLS, FCLT.

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Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed
© 2015 Royal Economic Society. This is the peer reviewed version of this article, which has been published in final form at DOI: 10.1111/ectj.12054. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Accepted author manuscript, 319 KBLicence: Unspecified

Cite this

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Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed

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