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Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed

  • Hadri, Kaddour
  • Kurozumi, Eiji
  • Rao, Yao

In this paper, we propose new cointegration tests for single equations and panels. In both cases, the asymptotic distributions of the tests, which are derived with N fixed and T going to infinity, are shown to be standard normals. The effects of serial correlation and cross-sectional dependence are mopped out via long-run variances. An effective bias correction is derived which is shown to work well in finite samples; particularly when N is smaller than T. Our panel tests are robust to possible cointegration across units.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25907/1/070econDP13-12.pdf
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Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2013-12.

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Length: 36, [2] p.
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:hit:econdp:2013-12
Contact details of provider: Phone: +81-42-580-8000
Web page: http://www.econ.hit-u.ac.jp/

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  1. Kaddour Hadri & Rolf Larsson & Yao Rao, 2012. "Testing For Stationarity With A Break In Panels Where The Time Dimension Is Finite," Bulletin of Economic Research, Wiley Blackwell, vol. 64(Supplemen), pages s123-s148, December.
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  9. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
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  16. Larsson, Rolf & Lyhagen, Johan, 2007. "Inference in Panel Cointegration Models With Long Panels," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 473-483, October.
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  26. repec:bla:buecrs:v:64:y:2012:i::p:s123-s148 is not listed on IDEAS
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