Cointegration in Panel Data with Breaks and Cross-Section Dependence
By Anindya Banerjee, Josep Lluís Carrion‐i‐Silvestre. Social Science Research Network, 2006
217 citations recorded by the source corpus.
The power of standard panel cointegration statistics may be affected by misspecification errors if proper account is not taken of the presence of structural breaks in the data. We propose modifications to allow for one structural break when testing the null hypothesis of no cointegration that retain good properties in terms of empirical size and power. Response surfaces to approximate the finite sample moments that are required to implement the statistics are provided. Since panel cointegration statistics rely on the assumption of cross-section independence, a generalisation of the tests to the common factor framework is carried out in order to allow for dependence among the units of the panel.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/e362e5e3e00e690a91befdfb91aa64d1e579f9f2
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In Economics and Econometrics
- Joakim Westerlund
- J. Urbain
- Franz C. Palm
- C. Gengenbach
- Josep Lluís Carrion‐i‐Silvestre
- Anindya Banerjee
- Muhammad Shahbaz
- Muntasir Murshed
Citations in the corpus
- The Performance of Panel Cointegration Methods: Results from a Large Scale Simulation Study (2009, unknown): “Panel cointegration tests that allow for some form of cross-sectional dependence via common factors include Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2006).”
- Testing for Panel Cointegration Using Common Correlated Effects Estimators (2017, methodology): “38: 610–636 (2017) DOI: 10.1111/jtsa.12234 The results of the test statistic in Banerjee and Carrion-i-Silvestre (2015) with up to six common factors are reported in Table XII.”
- Cointegration Testing in Panels with Common Factors (2006, methodology): “The theoretical validity of the proposed procedure, and that of Banerjee and Carrion-i-Silvestre (2006), relies on both large N and large T which may be unrealistic for applications with ‘moderate’ N and large T.”
- Panel cointegration tests of the Fisher effect (2006, background): “6See Banerjee and Carrion-i-Silvestre (2006) and Gengenbach et al. (2006) for a similar approaches.”