Testing for Panel Cointegration using Common Correlated Effects Estimators

Research output: Contribution to journalArticle

Authors

External organisations

  • University of Barcelona

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.

Details

Original languageEnglish
Pages (from-to)610-636
Number of pages27
JournalJournal of Time Series Analysis
Volume38
Issue number4
Early online date8 Mar 2017
Publication statusPublished - Jul 2017

Keywords

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