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Testing for panel cointegration in high dimensional data in the presence of cross-sectional dependency

Author

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  • Rashid Mansoor
  • Kristofer Månsson
  • Pär Sjölander

Abstract

This paper introduces some new methods to test for panel cointegration in the error correction framework. These methods are proposed since the previous approaches do not perform well when the number of cross-sectional units (N) is approximately equal to the number of time periods (T). By means of Monte Carlo simulations we investigate the size and power properties when N and T increase simultaneously, i.e., N/T → c where 0 < c ≤ 1. Based on the simulated results we may recommend a test for panel cointegration in high dimensional setting with cross-sectional dependency.

Suggested Citation

  • Rashid Mansoor & Kristofer Månsson & Pär Sjölander, 2021. "Testing for panel cointegration in high dimensional data in the presence of cross-sectional dependency," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 11(4), pages 406-418.
    • Handle: RePEc:ids:ijcome:v:11:y:2021:i:4:p:406-418
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