Cointegration testing in dependent panels with breaks

Di Iorio, Francesca and Fachin, Stefano (2007): Cointegration testing in dependent panels with breaks.

Abstract

In this paper we propose panel cointegration tests allowing for breaks and cross-section dependence based on the Continuos-Path Block bootstrap. Simulation evidence shows that the proposed panel tests have satisfactory size and power properties, hence improving considerably on asymptotic tests applied to individual series. As an empirical illustration we examine investment and saving for a panel of European countries over the 1960-2002 period, finding, contrary to the results of most individual tests, that the hypothesis of a long-run relationship with breaks is compatible with the data

• Item Type: MPRA Paper
• Institution: University of Rome ”La Sapienza”
• Language: English
• Keywords: Panel cointegration; continuos-path block bootstrap; breaks; Feldstein-Horioka Puzzle
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models

References

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