Cross-sectional correlation robust tests for panel cointegration

Christoph Hanck

Journal of Applied Statistics, 2009, vol. 36, issue 7, 817-833

Abstract: We use meta-analytic procedures to develop new tests for panel cointegration, combining p-values from time-series cointegration tests on the units of the panel. The tests are robust to heterogeneity and cross-sectional dependence between the panel units. To achieve the latter, we employ a sieve bootstrap procedure with joint resampling of the units' residuals. A simulation study shows that the tests can have substantially smaller size distortion than tests ignoring the presence of cross-sectional dependence while preserving high power. We apply the tests to a panel of post-Bretton Woods data to test for weak purchasing power parity.

Keywords: panel cointegration tests; cross-sectional dependence; sieve bootstrap (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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DOI: 10.1080/02664760802510042

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