SSE/EFI Working Paper Series in Economics and Finance
No 378:
Testing for common cointegrating rank in dynamic panels
Rolf Larsson and Johan Lyhagen ()
Abstract: The panel cointegration test of Larsson et al (1998) test
for the maximum number of cointegrating relations in a dynamic panel given
the assumption of a common cointegrating rank. This paper presents a test
for this assumption. The test is based on the test statistic of Larsson et
al (1998) and a new panel test based on the principal component estimator
of cointegrating relations of Harris (1997). The asymptotic distribution is
derived and shown to be standard normal. An extensive Monte Carlo
simulation shows that the test has good small sample size and power
properties. In the consumption function example in Larsson et al (1998) the
assumption of common cointegrating rank amongst 23 OECD countries is shown
to hold.
Keywords: Cointegration; Consumption; Panel data; Rank test.; (follow links to similar papers)
JEL-Codes: C12; C13; C15; C22; C23; D12; (follow links to similar papers)
43 pages, April 19, 2000
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