A0501
Title: Panel cointegration bounds testing with common factors
Authors: Anindya Banerjee - University of Birmingham (United Kingdom) [presenting]
Josep Lluis Carrion-i-Silvestre - Universitat de Barcelona (Spain)
Abstract: A panel data unit root statistic is proposed with cross-section dependence driven by unobserved common factors that are approximated by means of the common correlated effects estimation method. The null hypothesis of panel data unit root focuses on the idiosyncratic component, although the statistical inference is conducted using a bounds-testing strategy. Proceeding in this way, the analysis takes into account the fact that the cross-section dependence might be driven by $I(1)$ non-stationary common factors, $I(0)$ common factors, or a mixture of both $I(1)$ and $I(0)$ common factors and, therefore, extends some existing proposals in the literature.
