The Performance of Panel Cointegration Methods. Results from a Large Scale Simulation Study

Martin Wagner and Jaroslava Hlouskova
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Jaroslava Hlouskova: Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria

No 210, Economics Series from Institute for Advanced Studies

Abstract: This paper presents results concerning the performance of both single equation and system panel cointegration tests and estimators. The study considers the tests developed in Pedroni (1999, 2004), Westerlund (2005), Larsson, Lyhagen, and Löthgren (2001) and Breitung (2005); and the estimators developed in Phillips and Moon (1999), Pedroni (2000), Kao and Chiang (2000), Mark and Sul (2003), Pedroni (2001) and Breitung (2005). We study the impact of stable autoregressive roots approaching the unit circle, of I(2) components, of short-run cross-sectional correlation and of cross-unit cointegration on the performance of the tests and estimators. The data are simulated from three-dimensional individual specific VAR systems with cointegrating ranks varying from zero to two for fourteen different panel dimensions. The usual specifications of deterministic components are considered.

Keywords: Cross-sectional dependence; estimator; panel cointegration; simulation study; test (search for similar items in EconPapers)
JEL-codes: C12 C15 C23 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2007-05
New Economics Papers: this item is included in nep-cmp, nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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https://irihs.ihs.ac.at/id/eprint/1771 First version, 2007 (application/pdf)

Related works:
Journal Article: The Performance of Panel Cointegration Methods: Results from a Large Scale Simulation Study (2010)
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