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Abstract

This paper proposes a Lagrange multiplier (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 solvency of the current account, we find evidence of cointegration between saving and investment once a level break is accommodated. Copyright 2006 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0084.2006.00154.x
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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 68 (2006)
Issue (Month): 1 (02)
Pages: 101-132

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Handle: RePEc:bla:obuest:v:68:y:2006:i:1:p:101-132

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Find related papers by JEL classification:

• C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
• C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
• C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
• F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

References

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