Working Papers,
Lund University, Department of Economics

Abstract: This paper proposes an LM test for the null hypothesis of cointegration that allows for the possibility of multiple structural breaks in both the level and trend of a cointegrated panel regression. The test is general enough to allow for endogenous regressors, serial correlation and an unknown number of breaks that may be located at different dates for different individuals. We derive the limiting distribution of the test and conduct a small Monte Carlo study to investigate its finite sample properties. In our empirical application to the Feldstein-Horioka Puzzle, we find evidence of cointegration between saving and investment once a level break is accommodated.

Keywords: Panel Cointegration; Residual-Based Cointegration Test; Structural Break; Monte Carlo Simulation; Feldstein-Horioka Puzzle.

JEL-codes: C12; C32; C33; F21

35 pages, January 26, 2005

Download statistics

Published as

Joakim Westerlund, (2006), 'Testing for Panel Cointegration with Multiple Structural Breaks', Oxford Bulletin of Economics and Statistics, vol 68, pages 101-132

• Lund University, Department of Economics
• Home page for this series

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

RePEc:hhs:lunewp:2005_012This page generated on 2024-09-13 22:16:09.