Tests for cointegration in panels with regime shifts

Luciano Gutierrez

Econometrics from University Library of Munich, Germany

Abstract: In the paper we extend Gregory and Hansen’s (1996)ADF, Za, Zt cointegration tests to panel data, using the method proposed in Maddala and Wu (1999). We test the null hypothesis of no cointegration for all the units in the panel against the alternative hypothesis of cointegration, while allowing for a one-time regime shift of unknown timing for at least some regressions. We derive the panel tests for the ADF, Za, Zt tests , and compare these tests with Pedroni’s (1999) panel cointegration tests. We show that Gregory and Hansen’s (1996) panel tests have higher power to reject null when there is a structural change in the cointegration vector. We apply the statistics to the analysis of the well known Feldstein-Horioka puzzle for a sample of sixteen OCDE countries. After we allow for a structural break in the cointegration regression, we find strong evidence of cointegration between saving and investment rates.

Keywords: Panel data; Panel cointegration tests; Structural breaks; Feldstein-Horioka puzzle (search for similar items in EconPapers)
JEL-codes: C22 C23 F32 F41 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2005-05-24
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: Type of Document - pdf; pages: 16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0505007

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