Testing for Error Correction in Panel Data
AbstractThis paper proposes new error correction based cointegration tests for panel data. The limiting distributions of the tests are derived and critical values are provided. Our simulation results suggest that the tests have good small-sample properties with small size distortions and high power relative to other popular residual-based panel cointegration tests. In our empirical application, we present evidence suggesting that international health care expenditures and GDP are cointegrated once the possibility of an invalid common factor restriction has been accounted for.
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Bibliographic InfoPaper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 056.
Date of creation: 2006
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