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.

JEL-codes: C12; C31; C33

26 pages, January 26, 2005

Download statistics

Questions (including download problems) about the papers in this series should be directed to David Edgerton ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-06 14:12:28.