Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed

Kaddour Hadri (), Eiji Kurozumi () and Yao Rao

No 14-02, Economics Working Papers from Queen's Management School, Queen's University Belfast

Abstract: In this paper, we propose new cointegration tests for single equations and panels. In both cases, the asymptotic distributions of the tests, which are derived with N fixed and T -> infinity, are shown to be standard normals. The effects of serial correlation and cross-sectional dependence are mopped out via long-run variances. An effective bias correction is derived which is shown to work well in finite samples; particularly when N is smaller than T. Our panel tests are robust to possible cointegration across units.

Keywords: Cointegration; Panel cointegration; Cross-section dependence; Bias correction; DOLS; FCLT (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 C23 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-04
New Economics Papers: this item is included in nep-ets
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Related works:
Journal Article: Novel panel cointegration tests emending for cross‐section dependence with N fixed (2015)
Working Paper: Novel Panel Cointegration Tests Emending for Cross-Section Dependence with N Fixed (2013)
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