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Cross-sectional correlation robust tests for panel cointegration

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  • Christoph Hanck

Abstract

We use meta-analytic procedures to develop new tests for panel cointegration, combining p-values from time-series cointegration tests on the units of the panel. The tests are robust to heterogeneity and cross-sectional dependence between the panel units. To achieve the latter, we employ a sieve bootstrap procedure with joint resampling of the units' residuals. A simulation study shows that the tests can have substantially smaller size distortion than tests ignoring the presence of cross-sectional dependence while preserving high power. We apply the tests to a panel of post-Bretton Woods data to test for weak purchasing power parity.

Suggested Citation

  • Christoph Hanck, 2009. "Cross-sectional correlation robust tests for panel cointegration," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(7), pages 817-833.
    • Handle: RePEc:taf:japsta:v:36:y:2009:i:7:p:817-833
    DOI: 10.1080/02664760802510042
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    References listed on IDEAS

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    Cited by:

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    2. Herwartz, Helmut & Siedenburg, Florian, 2009. "The effects of variance breaks on homogenous panel unit root tests," Economics Working Papers 2009-07, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Uwe Hassler & Mehdi Hosseinkouchack, 2016. "Panel Cointegration Testing in the Presence of Linear Time Trends," Econometrics, MDPI, vol. 4(4), pages 1-16, November.
    4. Hassler Uwe & Werkmann Verena, 2014. "Multiple Comparisons and Joint Significance in Panel Unit Root Testing with Evidence on International Interest Rate Linkage," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(1), pages 23-43, February.
    5. Peñasco, Cristina & del Río, Pablo & Romero-Jordán, Desiderio, 2017. "Gas and electricity demand in Spanish manufacturing industries: An analysis using homogeneous and heterogeneous estimators," Utilities Policy, Elsevier, vol. 45(C), pages 45-60.
    6. Chang, Yoosoon & Nguyen, Chi Mai, 2012. "Residual based tests for cointegration in dependent panels," Journal of Econometrics, Elsevier, vol. 167(2), pages 504-520.
    7. Sheng, Xuguang & Yang, Jingyun, 2013. "An adaptive truncated product method for combining dependent p-values," Economics Letters, Elsevier, vol. 119(2), pages 180-182.
    8. Zankawah, Mutawakil M. & Stewart, Chris, 2019. "Does the exogeneity of oil prices matter in the oil price-macro-economy relationship for Ghana?," Economics Discussion Papers 2019-2, School of Economics, Kingston University London.
    9. Helmut Herwartz & Florian Siedenburg & Yabibal M. Walle, 2016. "Heteroskedasticity Robust Panel Unit Root Testing Under Variance Breaks in Pooled Regressions," Econometric Reviews, Taylor & Francis Journals, vol. 35(5), pages 727-750, May.

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