Article thumbnail
Location of Repository

Tests for cointegration in panels with regime shifts

By Luciano Gutierrez


In the paper we extend Gregory and Hansen’s (1996)ADF, Za, Zt cointegration tests to panel data, using the method proposed in Maddala and Wu (1999). We test the null hypothesis of no cointegration for all the units in the panel against the alternative hypothesis of cointegration, while allowing for a one-time regime shift of unknown timing for at least some regressions. We derive the panel tests for the ADF, Za, Zt tests , and compare these tests with Pedroni’s (1999) panel cointegration tests. We show that Gregory and Hansen’s (1996) panel tests have higher power to reject null when there is a structural change in the cointegration vector. We apply the statistics to the analysis of the well known Feldstein-Horioka puzzle for a sample of sixteen OCDE countries. After we allow for a structural break in the cointegration regression, we find strong evidence of cointegration between saving and investment rates.Panel data, Panel cointegration tests, Structural breaks, Feldstein-Horioka puzzle

OAI identifier:

Suggested articles


  1. (1996). A comparative study of panel data unit root tests and a new simple test,
  2. (1994). A Consistent test for a unit root,
  3. (2003). A new look at the Feldstein-Horioka puzzle using an integrated panel, CEPII workin papers n.
  4. (2005). A panel CUMSUM test of the null of cointegration,
  5. (1998). A Residual-based test for the null of cointegration in panel data,
  6. (1994). Approximate asymptotic distribution functions for unit-root and cointegration,
  7. (1990). Asymptotic properties of residual based tests for cointegration,
  8. (2002). Bootstrapping cointegrating regressions, mimeo,
  9. (1987). Co-integration and error correction: Representation, estimation, and testing,
  10. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors,
  11. (1980). Domestic saving and international capital flows,
  12. (2004). General diagnostic tests fro cross section dependence in panels.
  13. (2003). International R&D spillovers and productivity growth in the agricultural sector : A panel cointegration approach,
  14. (1999). International R&D spillovers: An application of estimation and inference in panel cointegration,
  15. (2001). Lag length selection and the construction of unit root tests with good size and power,
  16. (2000). Nonstationary panels, cointegration in panels and dynamic panels: A survey.
  17. (2003). On the power of panel cointegration tests: A Monte Carlo comparison,
  18. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with application to the PPP hypothesis,
  19. (2005). Panel LM unit root tests with level shift,
  20. (2004). PPP tests in cointegrated panels: evidence from Asian Developing countries.
  21. (1996). Residual based tests for cointegration in models with regime shifts,
  22. (1999). Spurious regression and residual-based tests for cointegration in panel data,
  23. (1932). Statistical methods for research workers,
  24. Testing for panel cointegration with multiple structural breaks,
  25. (2005). Testing for PPP: Should We Use Panel Methods?,
  26. (1996). Testing for structural breaks in cointegrated relationship,
  27. (2003). Testing for unit roots in heterogeneous panel.
  28. (1992). Tests for parameter instability in regressions with I(1) processes,
  29. (1981). The current account and macroeconomic adjustment in the 1970’s.
  30. (2002). The Feldestein-Horioka puzzle revisited,
  31. (1994). The Feldstein-Horioka puzzle and exchange rate regimes: evidence from cointegration tests,
  32. (2001). Unit root tests for panel data,
  33. (1991). values for cointegration tests,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.