Intersection tests for the cointegrating rank in dependent panel data

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This paper takes a multiple testing perspective on the problem of determining the cointegrating rank in macroeconometric panel data with cross-sectional dependence. The testing procedure for a common rank among the panel units is based on Simes’ (1986) intersection test and requires only the p-values of suitable individual test statistics. A Monte Carlo study demonstrates that these simple tests are robust to cross-sectional dependence and have reasonable size and power properties. A multivariate version of Kendall’s tau is used to test an important assumption underlying Simes’ procedure for dependent statistics. The proposed method is illustrated by an empirical application.
Original languageEnglish
JournalCommunications in Statistics - Simulation and Computation
Issue number4
Pages (from-to)918-941
Number of pages24
Publication statusPublished - 02.04.2020

Bibliographical note

Financial support by the German Research Foundation (DFG) through the project KA-3145/1-1 is gratefully acknowledged. The data for the empirical analysis was in part collected during a research stay of the second author at the Humboldt Universität in Berlin. The first author would like to thank Plamen Trayanov for helpful discussions. The authors are also grateful to two anonymous referees for their constructive comments and suggestions.