Testing for common cyclical features in nonstationary panel data models

Abstract

In this chapter we extend the concept of serial correlation common features to panel data models. This analysis is motivated both by the need to develop a methodology to systematically study and test for common structures and comovements in panel data with autocorrelation present and by an increase in efficiency coming from pooling procedures. We propose sequential testing procedures and study their properties in a small scale Monte Carlo analysis. Finally, we apply the framework to the well known permanent income hypothesis for 22 OECD countries, 1950–1992.

Citation

Hecq, A., Palm, F.C. and Urbain, J.-P. (2001), "Testing for common cyclical features in nonstationary panel data models", Baltagi, B.H., Fomby, T.B. and Carter Hill, R. (Ed.) Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 131-160. https://doi.org/10.1016/S0731-9053(00)15005-4