Novel panel cointegration tests emending for cross‐section dependence with  N  fixed | Zendy

Hadri Kaddour | Zendy; Kurozumi Eiji | Zendy; Rao Yao | Zendy

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Novel panel cointegration tests emending for cross‐section dependence with N fixed

Author(s) -

Hadri Kaddour,

Kurozumi Eiji,

Rao Yao

Publication year - 2015

Publication title -

the econometrics journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 3.861

H-Index - 36

eISSN - 1368-423X

pISSN - 1368-4221

DOI - 10.1111/ectj.12054

Subject(s) - cointegration , cross section (physics) , mathematics , statistics , section (typography) , econometrics , work (physics) , physics , computer science , thermodynamics , quantum mechanics , operating system

Summary In this paper, we propose new cointegration tests for single equations and panels. In both cases, the asymptotic distributions of the tests, which are derived with N fixed and T → ∞ , are shown to be standard normals. The effects of serial correlation and cross‐sectional dependence are mopped out via long‐run variances. An effective bias correction is derived, which is shown to work well in finite samples, particularly when N is smaller than T . Our panel tests are robust to possible cointegration across units.

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