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Small Sample Properties Of Panel Cointegration Tests In The Presence Of Structural Change

Author

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  • Georgi MARINOV

    (University of Economics – Varna)

Abstract

Panel tests for non-stationarity are increasingly popular in recent years, also for macroeconomic data. Given that panels used in practice are rather small, there is a need of exploring the small sample properties of the tests in various cases. For annual data the N dimension of the panels is limited to no more than 25, and spatial dimension is also limited, because of the nature of studied entities. So, the main concern of researchers remains the relatively small panels – theoretical critical values should be applied with caution, given that they are taken in limits. An additional feature of macroeconomic panels are cycles – with business cycles one can expect even more than one structural break in the series, because up to 3 major cycles can fit in a series with T=25. In the paper small sample properties for the three “group” statistics of Pedroni (1999) under presence of structural breaks are explored. A set of Monte Carlo experiments is applied to processes with a structural break for three possible break dates at 0.3T, 0.5T and 0.7T. Tested for power against the general alternative.

Suggested Citation

  • Georgi MARINOV, 2016. "Small Sample Properties Of Panel Cointegration Tests In The Presence Of Structural Change," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 5(1), pages 35-41, JULY.
    • Handle: RePEc:aes:jsesro:v:5:y:2016:i:1:p:35-41
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    References listed on IDEAS

    as
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    2. Newbold, Paul, et al, 2001. "U.S. and U.K. Interest Rates, 1890-1934: New Evidence on Structural Breaks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 235-250, May.
    3. Philipp Matros & Enzo Weber, 2014. "Non-stationary Interest Rate Differentials and the Role of Monetary Policy," International Economic Journal, Taylor & Francis Journals, vol. 28(3), pages 497-512, September.
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    More about this item

    Keywords

    panel cointegration; Pedroni tests; Monte Carlo studies; data with structural break; macroeconomic econometrics;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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