Testing for Panel Cointegration using Common Correlated Effects Estimators

Anindya Banerjee and Josep Carrion-i-Silvestre

Discussion Papers from Department of Economics, University of Birmingham

Abstract: Spurious regression analysis in panel data when the time series are cross-section dependent is analyzed in the paper. We show that consistent estimation of the long-run average parameter is possible once we control for cross-section dependence using cross-section averages in the spirit of the common correlated effects approach in Pesaran (2006). This result is used to design a panel cointegration test statistic accounting for cross-section dependence. The performance of the proposal is investigated in comparison with factor-based methods to control for cross-section dependence when strong, semi-weak and weak cross-section dependence may be present.

Keywords: panel cointegration; cross-section dependence; common factors; spatial econometrics (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-12
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://repec.cal.bham.ac.uk/pdf/15-02.pdf

Related works:
Journal Article: Testing for Panel Cointegration Using Common Correlated Effects Estimators (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:15-02

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