Version 1
: Received: 20 July 2024 / Approved: 21 July 2024 / Online: 22 July 2024 (09:58:26 CEST)
How to cite:
Olaniran, S. F.; Olaniran, O. R.; Allohibi, J.; Alharbi, A. A. A Novel Approach for Testing Fractional Cointegration in Panel Data Models with Fixed Effects. Preprints2024, 2024071680. https://doi.org/10.20944/preprints202407.1680.v1
Olaniran, S. F.; Olaniran, O. R.; Allohibi, J.; Alharbi, A. A. A Novel Approach for Testing Fractional Cointegration in Panel Data Models with Fixed Effects. Preprints 2024, 2024071680. https://doi.org/10.20944/preprints202407.1680.v1
Olaniran, S. F.; Olaniran, O. R.; Allohibi, J.; Alharbi, A. A. A Novel Approach for Testing Fractional Cointegration in Panel Data Models with Fixed Effects. Preprints2024, 2024071680. https://doi.org/10.20944/preprints202407.1680.v1
APA Style
Olaniran, S. F., Olaniran, O. R., Allohibi, J., & Alharbi, A. A. (2024). A Novel Approach for Testing Fractional Cointegration in Panel Data Models with Fixed Effects. Preprints. https://doi.org/10.20944/preprints202407.1680.v1
Chicago/Turabian Style
Olaniran, S. F., Jeza Allohibi and Abdulmajeed Atiah Alharbi. 2024 "A Novel Approach for Testing Fractional Cointegration in Panel Data Models with Fixed Effects" Preprints. https://doi.org/10.20944/preprints202407.1680.v1
Abstract
Fractional cointegration in time series data has been explored by several authors, but panel data applications have been largely neglected. A previous study of ours discovered that the Chen and Hurvich fractional cointegration test for time series was fairly robust to a moderate degree of heterogeneity across sections, out of the six tests considered. Therefore, this paper advances a customized version of the Chen and Hurvich methodology to detect cointegrating connections in panels with unobserved fixed effects. Specifically, we develop a test statistic that accommodates variation in the long-term cointegrating vectors and fractional cointegration parameters across observational units. The behaviour of our proposed test is examined through extensive Monte Carlo experiments under various data generating processes and circumstances. The findings reveal that our modified test performs quite well comparatively and can successfully identify fractional cointegrating relationships in panels even in the presence of idiosyncratic disturbances unique to each cross-sectional unit. Furthermore, the proposed modified test procedure established the presence of long-run equilibrium between the exchange rate and labour wage of 36 countries agricultural markets.
Keywords
Fractional Cointegration; Panel data; Fixed effect models; Residual-based test
Subject
Business, Economics and Management, Econometrics 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.
