Cointegration testing in dependent panels with breaks

Di Iorio, Francesca and Fachin, Stefano (2010): Cointegration testing in dependent panels with breaks.

Abstract

In this paper we test for the existence of a long-run relationship between investment and savings (the Feldstein-Horioka puzzle) in a panel of 18 OECD countries, 1970-2007, allowing for heterogenous breaks in the coefficients. For this purpose we develop a bootstrap panel cointegration test with breaks robust to cross-section dependence. The test suggests that, even allowing for breaks in the countries where capital control regulations changed in the sample period, there is no evidence of an investment-savings long-run relationship for the panel as a whole.

• Item Type: MPRA Paper
• Institution: University of Rome ”La Sapienza”
• English Title: Savings and investments in the OECD, 1970-2007: a panel cointegration test with breaks
• Language: English
• Keywords: Feldstein-Horioka Puzzle, Investment, Savings, Panel cointegration, stationary bootstrap, breaks, OECD.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General

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