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Testing for Panel Cointegration using Common Correlated Effects Estimators

Banerjee, Anindya and Carrion-i-Silvestre, Josep Lluis (2017) Testing for Panel Cointegration using Common Correlated Effects Estimators. Discussion Paper. University of Birmingham.

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Spurious regression analysis in panel data when the time series are cross-section dependent is analyzed in the paper. We show that consistent estimation of the long-run average parameter is possible once we control for cross-section dependence using cross-section averages in the spirit of the common correlated effects approach in Pesaran (2006). This result is used to design a panel cointegration test statistic accounting for cross-section dependence. The performance of the proposal is investigated in comparison with factor-based methods to control for cross-section dependence when strong, semi-weak and weak cross-section dependence may be present.

Type of Work:Monograph (Discussion Paper)
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Number of Pages:53
Department:Birmingham Business School
Date:February 2017
Keywords:panel cointegration, cross-section dependence, common factors, spatial econometrics
Subjects:A General Works > AI Indexes (General)
H Social Sciences > HA Statistics
Copyright Status:This discussion paper is copyright of the University and the author. In addition, parts of the paper may feature content whose copyright is owned by a third party, but which has been used either by permission or under the Fair Dealing provisions. The intellectual property rights in respect of this work are as defined by the terms of any licence that is attached to the paper. Where no licence is associated with the work, any subsequent use is subject to the terms of The Copyright Designs and Patents Act 1988 (or as modified by any successor legislation). Any reproduction of the whole or part of this paper must be in accordance with the licence or the Act (whichever is applicable) and must be properly acknowledged. For non-commercial research and for private study purposes, copies of the paper may be made/distributed and quotations used with due attribution. Commercial distribution or reproduction
Copyright Holders:The authors and the University of Birmingham
ID Code:3050

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