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XTMULTICOINTGRAT: Stata module for panel multicointegration testing with cross-section independence or approximate common factors

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  • Merwan Roudane

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Abstract

xtmulticointgrat tests for multicointegration - a "second layer" of long-run equilibrium - in a balanced panel of N cross-sectional units observed over T periods. A standard cointegrating relationship is y_i,t = c_t α_i + x_i,t β_i + ϑ_i,t with ϑ_i,t I(0). Multicointegration arises when the cumulated equilibrium error S_i,t = Σ ϑ_i,j is itself cointegrated with the original I(1) flows, that is y_i,t = m_t μ_i + S_i,t γ_i + u_i,t with u_i,t I(0). The classical Granger-Lee (1989) production / sales / inventory example is the canonical illustration. When at least two cross-sectional units share common stochastic trends, the test must be modified to account for cross-section dependence; Berenguer-Rico & Carrion-i-Silvestre (2006) adapt the Bai-Ng (2004) PANIC framework for this purpose.

Suggested Citation

  • Merwan Roudane, 2026. "XTMULTICOINTGRAT: Stata module for panel multicointegration testing with cross-section independence or approximate common factors," Statistical Software Components S459724, Boston College Department of Economics.
    • Handle: RePEc:boc:bocode:s459724
    Note: This module should be installed from within Stata by typing "ssc install multicointgrat". The module is made available under terms of the GPL v3 (https://www.gnu.org/licenses/gpl-3.0.txt). Windows users should not attempt to download these files with a web browser.
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