Premium
Combination of Tests for Cointegration in Cross‐Correlated Panels
Author(s) -
Werkmann Verena
Publication year - 2019
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12263
Subject(s) - cointegration , linkage (software) , monte carlo method , econometrics , mathematics , statistics , chemistry , biochemistry , gene
In this paper, Cheng and Sheng's (2017) combination of ‘combinations of P ‐values’ (CCP) is extended to a combination of more than two tests and applied for cointegration testing in cross‐correlated panels. In a Monte Carlo experiment, power and size of the different combinations of combinations are investigated. If uncertainty about the panel configuration is taken into account, the results indicate that a multi‐test combination can minimize power losses. Furthermore, the usefulness of the combinations studied is illustrated by an application to international interest rate linkage. Cross‐sectional dependencies in both the simulation and the empirical studies are accounted for by using the block bootstrap.