Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects

Saidat Fehintola Olaniran
,
Oyebayo Ridwan Olaniran
* ORCID logo ,
Jeza Allohibi
ORCID logo ,
Abdulmajeed Atiah Alharbi
ORCID logo ,
Mohd Tahir Ismail
ORCID logo
Version 1 : Received: 15 March 2024 / Approved: 18 March 2024 / Online: 18 March 2024 (09:46:56 CET)

A peer-reviewed article of this Preprint also exists.

Olaniran, S.F.; Olaniran, O.R.; Allohibi, J.; Alharbi, A.A.; Ismail, M.T. A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects. Mathematics 2024, 12, 1172. Olaniran, S.F.; Olaniran, O.R.; Allohibi, J.; Alharbi, A.A.; Ismail, M.T. A Generalized Residual-Based Test for Fractional Cointegration in Panel Data with Fixed Effects. Mathematics 2024, 12, 1172.

Abstract

Asymptotic theories for fractional cointegrations have been extensively studied in the context of time series data, with numerous empirical studies and tests developed. However, most of the previously developed testing procedures for fractional cointegration were primarily designed for time series data. This paper proposes a generalized residual-based test for fractionally cointegrated panels with fixed effects. The test development is based on bivariate panel series with the regressor assumed to be fixed across cross-sectional units. The proposed test procedure accommodates any integration order between [0,1], and it is asymptotically normal under the null hypothesis. Monte Carlo experiments demonstrate that the test exhibits better size and power compared to a similar residual-based test across varying sample sizes.

Keywords

fractional cointegration, Residual-based test, panel data model, fixed effects, Asymptotic theory

Subject

Computer Science and Mathematics, Probability and Statistics

Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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