Likelihood-Based Cointegration Tests in Heterogeneous Panels
AbstractThis paper presents a likelihood-based panel test of cointegrating rank in heterogeneous panel models based on the mean of the individual rank trace statistics. The existence of the first two moments of the asymptotic distribution of the individual trace statistic is established. Based on this, the asymptotic distribution of the test statistic is shown to be normal. The small-sample size and power properties are investigated using Monte Carlo simulations. An empirical example for a consumption model including consumption, income and inflation is estimated for 23 OECD countries over the period 1960-1994. The results indicate that two cointegrating relations exist in the system: One containing consumption and income and one inflation only.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 250.
Length: 27 pages
Date of creation: 26 Aug 1998
Date of revision: 27 Aug 1998
Publication status: Published in Econometrics Journal, 2001, pages 109-142.
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
Cointegration; Consumption; Monte Carlo simulations; Panel data; Rank test.;
Other versions of this item:
- Rolf Larsson & Johan Lyhagen & Mickael Lothgren, 2001. "Likelihood-based cointegration tests in heterogeneous panels," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 41.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-09-07 (All new papers)
- NEP-ECM-1998-09-07 (Econometrics)
- NEP-ETS-1998-09-07 (Econometric Time Series)
- NEP-IFN-1998-09-07 (International Finance)
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