Testing for common cointegrating rank in dynamic panels
AbstractThe panel cointegration test of Larsson et al (1998) test for the maximum number of cointegrating relations in a dynamic panel given the assumption of a common cointegrating rank. This paper presents a test for this assumption. The test is based on the test statistic of Larsson et al (1998) and a new panel test based on the principal component estimator of cointegrating relations of Harris (1997). The asymptotic distribution is derived and shown to be standard normal. An extensive Monte Carlo simulation shows that the test has good small sample size and power properties. In the consumption function example in Larsson et al (1998) the assumption of common cointegrating rank amongst 23 OECD countries is shown to hold.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 378.
Length: 43 pages
Date of creation: 19 Apr 2000
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Cointegration; Consumption; Panel data; Rank test.;
Find related papers by JEL classification:
- 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-2000-05-08 (All new papers)
- NEP-ECM-2000-05-08 (Econometrics)
- NEP-ETS-2000-05-08 (Econometric Time Series)
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