Testing for Multicointegration in Panel Data with Common Factors*

Vanessa Berenguer‐Rico and Josep Lluís Carrion‐i‐Silvestre
Authors registered in the RePEc Author Service: Josep Lluís Carrion-i-Silvestre

Oxford Bulletin of Economics and Statistics, 2006, vol. 68, issue s1, 721-739

Abstract: This paper addresses the concept of multicointegration in a panel data framework and builds upon the panel data cointegration procedures developed in Pedroni [Econometric Theory (2004), Vol. 20, pp. 597–625]. When individuals are either cross‐section independent, or cross‐section dependence can be removed by cross‐section demeaning, our approach can be applied to the wider framework of mixed I(2) and I(1) stochastic processes. The paper also deals with the issue of cross‐section dependence using approximate common‐factor models. Finite sample performance is investigated through Monte Carlo simulations. Finally, we illustrate the use of the procedure investigating an inventories, sales and production relationship for a panel of US industries.

Date: 2006
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Citations: View citations in EconPapers (10)

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https://doi.org/10.1111/j.1468-0084.2006.00453.x

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Working Paper: Testing for multicointegration in panel data with common factors (2006)
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