The Performance of Panel Cointegration Methods: Results from a Large Scale Simulation Study

Wagner, MartinORCID: https://orcid.org/0000-0002-6123-4797 and Hlouskova, JaroslavaORCID: https://orcid.org/0000-0002-2298-0068 (2009) The Performance of Panel Cointegration Methods: Results from a Large Scale Simulation Study. Econometric Reviews, 29 (2), pp. 182-223. https://doi.org/10.1080/07474930903382182

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Abstract

This article presents results concerning the performance of both single equation and system panel cointegration tests and estimators. The study considers the tests developed in Pedroni (1999, 2004), Westerlund (2005), Larsson et al. (2001), and Breitung (2005) and the estimators developed in Phillips and Moon (1999), Pedroni (2000), Kao and Chiang (2000), Mark and Sul (2003), Pedroni (2001), and Breitung (2005). We study the impact of stable autoregressive roots approaching the unit circle, of I(2) components, of short-run cross-sectional correlation and of cross-unit cointegration on the performance of the tests and estimators. The data are simulated from three-dimensional individual specific VAR systems with cointegrating ranks varying from zero to two for fourteen different panel dimensions. The usual specifications of deterministic components are considered.

Item Type: Article in Academic Journal
Keywords: Cross-sectional dependence, Estimator, Panel cointegration, Simulation study, Test
Classification Codes (e.g. JEL): C12, C15, C23
Date Deposited: 26 May 2015 08:17
Last Modified: 13 Dec 2023 12:45
DOI: 10.1080/07474930903382182
ISSN: 0747-4938 (Print), 1532-4168 (Online)
URI: https://irihs.ihs.ac.at/id/eprint/3377

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