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A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects

Author

Listed:
  • Saidat Fehintola Olaniran

    (Department of Statistics and Mathematical Sciences, Faculty of Pure and Applied Sciences, Kwara State University, Malete 1530, Nigeria
    These authors contributed equally to this work.)

  • Oyebayo Ridwan Olaniran

    (Department of Statistics, Faculty of Physical Sciences, University of Ilorin, Ilorin 1515, Nigeria
    These authors contributed equally to this work.)

  • Jeza Allohibi

    (Department of Mathematics, Faculty of Science, Taibah University, Al-Madinah Al-Munawara 42353, Saudi Arabia)

  • Abdulmajeed Atiah Alharbi

    (Department of Mathematics, Faculty of Science, Taibah University, Al-Madinah Al-Munawara 42353, Saudi Arabia)

  • Mohd Tahir Ismail

    (School of Mathematical Sciences, Universiti Sains Malaysia, Pulau Pinang 11800, Malaysia)

Abstract

Asymptotic theories for fractional cointegrations have been extensively studied in the context of time series data, with numerous empirical studies and tests having been developed. However, most previously developed testing procedures for fractional cointegration are primarily designed for time series data. This paper proposes a generalized residual-based test for fractionally cointegrated panels with fixed effects. The test’s development is based on a bivariate panel series with the regressor assumed to be fixed across cross-sectional units. The proposed test procedure accommodates any integration order between [ 0 , 1 ] , and it is asymptotically normal under the null hypothesis. Monte Carlo experiments demonstrate that the test exhibits better size and power compared to a similar residual-based test across varying sample sizes.

Suggested Citation

  • Saidat Fehintola Olaniran & Oyebayo Ridwan Olaniran & Jeza Allohibi & Abdulmajeed Atiah Alharbi & Mohd Tahir Ismail, 2024. "A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects," Mathematics, MDPI, vol. 12(8), pages 1-11, April.
    • Handle: RePEc:gam:jmathe:v:12:y:2024:i:8:p:1172-:d:1375219
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    References listed on IDEAS

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