Testing for panel cointegration using common correlated effects estimators

Anindya Banerjee, Josep Carrion-i-Sivestre

Research output: Contribution to journalArticlepeer-review

42 Citations (Scopus)
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Abstract

Spurious regression analysis in panel data when the time series are cross-section dependent is analyzed in the paper. We show that consistent estimation of the long-run average parameter is possible once we control for cross-section dependence using cross-section averages in the spirit of the common correlated effects approach in Pesaran (2006). This result is used to design a panel cointegration test statistic accounting for cross-section dependence. The performance of the proposal is investigated in comparison with factor-based methods to control for cross-section dependence when strong, semi-weak and weak cross-section dependence may be present.
Original languageEnglish
Pages (from-to)610-636
Number of pages27
JournalJournal of Time Series Analysis
Volume38
Issue number4
Early online date8 Mar 2017
DOIs
Publication statusPublished - Jul 2017

Keywords

  • C12
  • C22
  • panel cointegration
  • cross-section dependence
  • common factors
  • spatial econometrics

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