Piotr Kębłowski
ARTICLE

(English) PDF

ABSTRACT

Small-sample properties of bootstrap cointegration rank tests for unrestricted panel VAR process are considered when long-run cross-sectional dependencies occur. It is shown that the bootstrap cointegration rank tests for the panel VAR model based on levels canonical correlation analysis are oversized, whereas the bootstrap cointegration rank tests based on maximum likelihood framework are undersized. Moreover, the former tests are in general outperformed by the latter in terms of performance. The results of the investigation indicate that the ML-based bootstrap cointegration rank tests perform well in small samples for small-sized panel VAR models with a few cross-sections.

KEYWORDS

cross-sectional cointegrating vectors, canonical correlation analysis, cointegration tests, panel VAR model, Box and Tiao approach

REFERENCES

Anderson R., Qian H., Rasche R., (2006), Analysis of Panel Vector Error Correction Models Using Maximum Likelihood, the Bootstrap, and Canonical-Correlation Estimators, Federal Reserve Bank of St. Louis Working Paper Series, Working Paper, 2006-050A.

Banerjee A., Marcelino M., Osbat C., (2004), Some Cautions on the Use of Panel Methods for Integrated Series of Macroeconomic Data, Econometrics Journal, 7, 322–340.

Bewley R., Orden D., Yang M., Fisher L. A., (1994), Comparison of Box-Tiao and Johansen Canonical Estimators of Cointegrating Vectors in VEC(1) Models, Journal of Econometrics, 64, 3–27.

Bewley R., Yang M., (1995), Tests for Cointegration Based on Canonical Correlation Analysis, Journal of the American Statistical Association, 90, 990–996.

Box G. E. P., Tiao G. C., (1977), A Canonical Analysis of Multiple Time Series, Biometrika, 64, 355– –365.

Cavaliere G., Rahbek A., Taylor M. R., (2012), Bootstrap Determination of the Co-integration Rank in Vector Autoregressive Models, Econometrica, 80, 1721–1740.

Groen J. J. J., Kleibergen F., (2003), Likelihood-Based Cointegration Analysis in Panels of Vector Error Correction Models, Journal of Business and Economics Statistics, 21, 295–318.

Jacobson T., Lyhagen J., Larsson R., Nessén M., (2008), Inflation, Exchange Rates and PPP in a Multivariate Panel Cointegration Model, Econometrics Journal, 11, 58–79.

Johansen S., (1988), Statistical Analysis of Cointegration Vectors, Journal of Economic Dynamics and Control, 12, 231–254.

Johansen S., (2002), A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model, Econometrica, 70, 1929–1961.

Kao C., (1999), Spurious Regression and Residual-based Tests for Cointegration in Panel Data, Journal of Econometrics, 90, 1–44.

Kębłowski P., (2016), Canonical Correlation Analysis in Panel Vector Error Correction Model. Performance Comparison, Central European Journal of Economic Modelling and Econometrics, 4, 203–217.

Larsson R., Lyhagen J., (2000), Testing for Common Cointegrating Rank in Dynamic Panels, Stockholm School of Economics Working Paper Series in Economics and Finance, 378.

Larsson R., Lyhagen J., (2007), Inference in Panel Cointegration Models with Long Panels, Journal of Business and Economic Statistics, 25, 473–483.

Larsson R., Lyhagen J., Löthgren M., (2001), Likelihood-based Cointegration Tests in Heterogeneous Panels, Econometrics Journal, 4, 109–142.

McCoskey S., Kao C., (1998), A Residual-Based Test of the Null of Cointegration in Panel Data, Econometric Reviews, 17, 57–84.

Pedroni P., (1999), Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors, Oxford Bulletin of Economics and Statistics, 61, 653–670.

Pesaran M. H., Schuermann T., Weiner S.M., (2004), Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model, Journal of Business and Economic Statistics, 22, 129–162.

Phillips P. C. B., Moon H. R., (1999), Linear Regression Limit Theory for Nonstationary Panel Data, Econometrica, 67, 1057–1111.

Swensen A. R., (2006), Bootstrap Algorithms for Testing and Determining the Cointegration Rank in the VAR Models, Econometrica, 74, 1699–1714.

van Giersbergen N. P. A., (1996), Bootstraping the Trace Statistic in VAR Models: Monte Carlo Results and Applications, Oxford Bulletin of Economics and Statistics, 58, 391–408.

Yang M., Bewley R., (1996), On Cointegration Tests for VAR Models with Drift, Economics Letters, 51, 45–50.

Back to top
Copyright © 2019 Statistics Poland