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Simple Tests for Cointegration in Dependent Panels with Structural Breaks

Westerlund, Joakim LU and Edgerton, David LU (2008) In Oxford Bulletin of Economics and Statistics 70(5). p.665-704
Abstract
This paper develops a very simple test for the null hypothesis of no cointegration in panel data. The test is general enough to allow for heteroskedastic and serially correlated errors, unit-specific time trends, cross-sectional dependence and unknown structural breaks in both the intercept and slope of the cointegrated regression, which may be located at different dates for different units. The limiting distribution of the test is derived, and is found to be normal and free of nuisance parameters under the null. Asmall simulation study is also conducted to investigate the small-sample properties of the test. In our empirical application, we provide new evidence concerning the purchasing power parity hypothesis.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Oxford Bulletin of Economics and Statistics
volume
70
issue
5
pages
665 - 704
publisher
Wiley-Blackwell
external identifiers
  • Scopus:52049121862
ISSN
1468-0084
language
English
LU publication?
yes
id
b149ff87-caed-4e2a-8e91-bed1bfe522b5 (old id 1388398)
date added to LUP
2009-04-20 12:27:30
date last changed
2016-10-13 05:00:24
@misc{b149ff87-caed-4e2a-8e91-bed1bfe522b5,
  abstract     = {This paper develops a very simple test for the null hypothesis of no cointegration in panel data. The test is general enough to allow for heteroskedastic and serially correlated errors, unit-specific time trends, cross-sectional dependence and unknown structural breaks in both the intercept and slope of the cointegrated regression, which may be located at different dates for different units. The limiting distribution of the test is derived, and is found to be normal and free of nuisance parameters under the null. Asmall simulation study is also conducted to investigate the small-sample properties of the test. In our empirical application, we provide new evidence concerning the purchasing power parity hypothesis.},
  author       = {Westerlund, Joakim and Edgerton, David},
  issn         = {1468-0084},
  language     = {eng},
  number       = {5},
  pages        = {665--704},
  publisher    = {ARRAY(0x8c430f0)},
  series       = {Oxford Bulletin of Economics and Statistics},
  title        = {Simple Tests for Cointegration in Dependent Panels with Structural Breaks},
  volume       = {70},
  year         = {2008},
}