A panel cointegrating rank test with structural breaks and cross-sectional dependence
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In: Econometrics and Statistics, Vol. 17, 01.01.2021, p. 107-129.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - A panel cointegrating rank test with structural breaks and cross-sectional dependence
AU - Arsova, Antonia
AU - Karaman Örsal, Deniz Dilan
N1 - Funding Information: Financial support by the German Research Foundation (DFG) through the project KA-3145/1-2 is gratefully acknowledged. The authors also thank two anonymous referees and the associate editor for many helpful comments and suggestions. Publisher Copyright: © 2020 The Author(s)
PY - 2021/1/1
Y1 - 2021/1/1
N2 - A new panel cointegrating rank test which allows for a linear time trend with breaks and cross-sectional dependence is proposed. The new correlation-augmented inverse normal (CAIN) test is based on a modification of the inverse normal method and combines the p-values of individual likelihood-ratio trace statistics by assuming that the number of breaks and break points are known. A Monte Carlo study demonstrates its robustness to cross-sectional dependence and its superior size and power properties compared to other meta-analytic tests used in practice. The test is applied to investigate the long-run relationship between regional house prices and personal income in the United States in view of the structural break introduced by the Global Financial Crisis.
AB - A new panel cointegrating rank test which allows for a linear time trend with breaks and cross-sectional dependence is proposed. The new correlation-augmented inverse normal (CAIN) test is based on a modification of the inverse normal method and combines the p-values of individual likelihood-ratio trace statistics by assuming that the number of breaks and break points are known. A Monte Carlo study demonstrates its robustness to cross-sectional dependence and its superior size and power properties compared to other meta-analytic tests used in practice. The test is applied to investigate the long-run relationship between regional house prices and personal income in the United States in view of the structural break introduced by the Global Financial Crisis.
KW - Economics
KW - Panel cointegrating rank test
KW - Structural breaks
KW - Cross-sectional dependence
KW - likelihood-ratio
KW - Time trend
UR - http://www.scopus.com/inward/record.url?scp=85087934240&partnerID=8YFLogxK
UR - https://www.mendeley.com/catalogue/8ad8bf7e-8978-3698-9995-6f498248fa17/
U2 - 10.1016/j.ecosta.2020.05.002
DO - 10.1016/j.ecosta.2020.05.002
M3 - Journal articles
VL - 17
SP - 107
EP - 129
JO - Econometrics and Statistics
JF - Econometrics and Statistics
SN - 2452-3062
ER -