A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects

Saidat Fehintola Olaniran, Oyebayo Ridwan Olaniran (), Jeza Allohibi, Abdulmajeed Atiah Alharbi and Mohd Tahir Ismail
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Saidat Fehintola Olaniran: Department of Statistics and Mathematical Sciences, Faculty of Pure and Applied Sciences, Kwara State University, Malete 1530, Nigeria
Oyebayo Ridwan Olaniran: Department of Statistics, Faculty of Physical Sciences, University of Ilorin, Ilorin 1515, Nigeria
Jeza Allohibi: Department of Mathematics, Faculty of Science, Taibah University, Al-Madinah Al-Munawara 42353, Saudi Arabia
Abdulmajeed Atiah Alharbi: Department of Mathematics, Faculty of Science, Taibah University, Al-Madinah Al-Munawara 42353, Saudi Arabia
Mohd Tahir Ismail: School of Mathematical Sciences, Universiti Sains Malaysia, Pulau Pinang 11800, Malaysia

Mathematics, 2024, vol. 12, issue 8, 1-11

Abstract: Asymptotic theories for fractional cointegrations have been extensively studied in the context of time series data, with numerous empirical studies and tests having been developed. However, most previously developed testing procedures for fractional cointegration are primarily designed for time series data. This paper proposes a generalized residual-based test for fractionally cointegrated panels with fixed effects. The test’s development is based on a bivariate panel series with the regressor assumed to be fixed across cross-sectional units. The proposed test procedure accommodates any integration order between [ 0 , 1 ] , and it is asymptotically normal under the null hypothesis. Monte Carlo experiments demonstrate that the test exhibits better size and power compared to a similar residual-based test across varying sample sizes.

Keywords: fractional cointegration; residual-based test; panel data model; fixed effects; asymptotic theory (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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