Some cautions on the use of panel methods for integrated series of macroeconomic data

Anindya Banerjee, Massimiliano Marcellino and Chiara Osbat

Econometrics Journal, 2004, vol. 7, issue 2, 322-340

Abstract: Existing panel cointegration tests rule out cross-unit cointegrating relationships, while economic theory and empirical observation argue strongly in favour of their presence. Using an extensive set of simulation experiments, we show that both univariate and multivariate panel cointegration tests can be substantially oversized in the presence of cross-unit cointegration. We also propose a test for cross-unit cointegration that performs well in practice and can be used to decide upon the usefulness of panel methods. Copyright Royal Economic Socciety 2004

Date: 2004
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Related works:
Working Paper: Some Cautions on the Use of Panel Methods for Integrated Series of Macro-economic Data (2000)
Working Paper: Some Cautions on the Use of Panel Methods for Integrated Series of Macro-Economic Data
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