Scandinavian Working Papers in Economics
Working Papers,
Lund University, Department of Economics
No 2005:8: New Simple Tests for Panel Cointegration
Joakim Westerlund ()
Additional contact information
Joakim Westerlund: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Abstract: We propose two new simple residual-based panel data tests for the null of no cointegration. The tests are simple because they do not require any correction for the temporal dependencies of the data. Yet they are able to accommodate individual specific short-run dynamics, individual specific intercept and trend terms, as well as individual specific slope parameters. A third test that is modified to accommodate for cross-sectionally dependent data is also proposed. We derive the limiting distributions of the tests and show that they are free of nuisance parameters. Our Monte Carlo results suggest that the asymptotic results are borne out well even in very small samples.
Keywords: Panel Cointegration; Residual-Based Tests; Cross-Sectional Dependence; Monte Carlo Simulation.
26 pages, January 26, 2005
- Published as
- Joakim Westerlund, (2005), 'New Simple Tests for Panel Cointegration', Econometric Reviews, vol 24, no 3, pages 297-316
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