Testing for Breaks in Cointegrated Panels

Author(s)/Creator(s)

Chihwa Kao, Syracuse University
Lorenzo Trapani, Cass Business School, London (UK)
Giovanni Urga, Cass Business School, London (UK) and University of Bergamo (Italy)

Description/Abstract

We investigate the issue of testing for structural breaks in large cointegrated panels with common and idiosyncratic regressors. We prove a panel Functional Central Limit Theorem. We show that the estimated coefficients of the common regressors have a mixed normal distribution, whilst the estimated coefficients of the idiosyncratic regressors have a normal distribution. We consider strong dependence across the idiosyncratic regressors by allowing for the presence of (stationary and nonstationary) common factors. We show that tests based on transformations of Wald-type statistics have power versus alternatives of order

Document Type

Working Paper

Date

2-2012

Keywords

Structural change, Panel cointegration, Common trends

Series

Working Papers Series

Disciplines

Economics

Additional Information

Working paper no. 135

Recommended Citation

Kao, Chihwa; Trapani, Lorenzo; and Urga, Giovanni, "Testing for Breaks in Cointegrated Panels" (2012). Center for Policy Research. 157.
https://surface.syr.edu/cpr/157

Source

local input

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.