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A simple test for cointegration in dependent panels with structural breaks

Westerlund, Joakim and Edgerton, David L. 2008, A simple test for cointegration in dependent panels with structural breaks, Oxford bulletin of economics and statistics, vol. 70, no. 5, pp. 665-704, doi: 10.1111/j.1468-0084.2008.00513.x.

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Title A simple test for cointegration in dependent panels with structural breaks
Author(s) Westerlund, Joakim
Edgerton, David L.
Journal name Oxford bulletin of economics and statistics
Volume number 70
Issue number 5
Start page 665
End page 704
Total pages 40
Publisher Wiley
Place of publication Chichester, Eng.
Publication date 2008
ISSN 1468-0084
Keyword(s) Social Sciences
Science & Technology
Physical Sciences
Social Sciences, Mathematical Methods
Business & Economics
Mathematical Methods In Social Sciences
Panel Cointegration
Cointegration Test
Structural Break
Cross-Sectional Dependence
Common Factor
Summary This paper develops a very simple test for the null hypothesis of no cointegration in panel data. The test is general enough to allow for heteroskedastic and serially correlated errors, unit-specific time trends, cross-sectional dependence and unknown structural breaks in both the intercept and slope of the cointegrated regression, which may be located at different dates for different units. The limiting distribution of the test is derived, and is found to be normal and free of nuisance parameters under the null. A small simulation study is also conducted to investigate the small-sample properties of the test. In our empirical application, we provide new evidence concerning the purchasing power parity hypothesis. © Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2008.
Language eng
DOI 10.1111/j.1468-0084.2008.00513.x
Field of Research 150202 Financial Econometrics
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2008, Wiley
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Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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