Testing for Multicointegration in Panel Data with Common Factors
This paper addresses the concept of multicointegration in a panel data framework and builds upon the panel data cointegration procedures developed in Pedroni ["Econometric Theory" (2004), Vol. 20, pp. 597-625]. When individuals are either cross-section independent, or cross-section dependence can be removed by cross-section demeaning, our approach can be applied to the wider framework of mixed "I"(2) and "I"(1) stochastic processes. The paper also deals with the issue of cross-section dependence using approximate common-factor models. Finite sample performance is investigated through Monte Carlo simulations. Finally, we illustrate the use of the procedure investigating an inventories, sales and production relationship for a panel of US industries. Copyright 2006 Blackwell Publishing Ltd.
Year of publication: |
2006
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Authors: | Berenguer-Rico, Vanessa ; Carrion-i-Silvestre, Josep LluĂs |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 68.2006, s1, p. 721-739
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Publisher: |
Department of Economics |
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