Simple Tests for Cointegration in Dependent Panels with Structural Breaks

Joakim Westerlund and David Edgerton

No 2006:13, Working Papers from Lund University, Department of Economics

Abstract: This paper develops two very simple tests for the null hypothesis of no cointegration in panel data. The tests are general enough to allow for heteroskedastic and serially correlated errors, unit specific time trends, cross-sectional dependence and an unknown structural break in both the intercept and slope of the cointegrated regression, which may be located different dates for different units. The limiting distributions of the tests are derived, and are found to be normal and free of nuisance parameters under the null. A small simulation study is also conducted to investigate the small-sample properties of the tests.

Keywords: Panel Cointegration; Cointegration Test; Structural Break; Cross-Sectional Dependence; Common Factor (search for similar items in EconPapers)
JEL-codes: C12 C32 C33 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-05-04, Revised 2007-01-28
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (12)

Published in Oxford Bulletin of Economics and Statistics, 2008, pages 665-704.

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Journal Article: A Simple Test for Cointegration in Dependent Panels with Structural Breaks* (2008)
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