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Joakim Westerlund. Photo.

Joakim Westerlund

Professor, Programme director – Master of Data Analytics and Business Economics

Joakim Westerlund. Photo.

Reducing the size distortions of the panel LM Test for cointegration

Author

  • Joakim Westerlund

Summary, in English

This paper proposes a simple procedure to reduce the size distortions of the panel LM test for cointegration. The new procedure is based on first splitting the sample into even and odd numbered observations, and to employ the panel LM test to each subsample. The two tests are then combined using the Bonferroni principle as suggested by Choi [Choi, I., 2004, Improving the empirical size of the KPSS Test of stationarity, unpublished manuscript, Department of Economics, Hong Kong University of Science and Technology]. The Monte Carlo evidence suggests that this procedure can lead to substantial reduction in size distortions when the equilibrium errors are autoregressive. (c) 2005 Elsevier B.V. All rights reserved.

Department/s

  • Department of Economics

Publishing year

2006

Language

English

Pages

384-389

Publication/Series

Economics Letters

Volume

90

Issue

3

Document type

Journal article

Publisher

Elsevier

Topic

  • Economics

Keywords

  • bonferroni inequality
  • panel cointegration
  • size distortion

Status

Published

ISBN/ISSN/Other

  • ISSN: 0165-1765