A Bootstrap Cointegration Rank Test for Panels of VAR Models
AbstractThis paper proposes a sequential procedure to determine the common cointegration rank of panels of cointegrated VARs. It shows how a panel of cointegrated VARs can be transformed in a set of independent individual models. The likelihood function of the transformed panel is the sum of the likelihood functions of the individual Cointegrated VARs (CVAR) models. A bootstrap based procedure is used to compute empirical distributions of the trace test statistics for these individual models. From these empirical distributions two panel trace test statistics are constructed. The satisfying small sample properties of these tests are documented by means of Monte Carlo. An empirical application illustrates the usefullness of this tests.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2010-75.
Date of creation: 01 Dec 2010
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Web page: http://www.econ.au.dk/afn/
Rank test; Panel data; Cointegration; Bootstrap; Cross section dependence.;
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; Diffusion Processes
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-ECM-2010-12-11 (Econometrics)
- NEP-ETS-2010-12-11 (Econometric Time Series)
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- Antonia Arsova & Deniz Dilan Karaman Oersal, 2013. "Likelihood-based panel cointegration test in the presence of a linear time trend and cross-sectional dependence," Working Paper Series in Economics 280, University of Lüneburg, Institute of Economics.
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