Testing for Breaks in Cointegrated Panels - with an Application to the Feldstein-Horioka Puzzle

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Abstract:Stability tests for cointegrating coefficients are known to have very low power with small to medium sample sizes. In this paper we propose to solve this problem by extending the tests to dependent cointegrated panels through the stationary bootstrap. Simulation evidence shows that the proposed panel tests improve considerably on asymptotic tests applied to individual series. As an empirical illustration we examined investment and saving for a panel of 14 European countries over the 1960-2002 period. While the individual stability tests, contrary to expectations and graphical evidence, in almost all cases do not reject the null of stability, the bootstrap panel tests lead to the more plausible conclusion that the long-run relationship between these two variables is likely to have undergone a break. JEL: C23, C15

Systems GMM estimates of the Feldstein–Horioka puzzle for the OECD countries and tests for structural breaks

“…This conclusion is similar to the conclusions in the more recent studies by Fouquau et. al., (2009), Katsimi and Moutos (2007), Di Iorio and Fachin (2007) and Christopoulos (2007) In Table 3 the results for structural breaks with the Mancini-Grifolli and Pauwels (2006) tests are reported in the last row. We have tried with various break dates for the effects of both the Bretton Woods and the Maastricht agreements of 1972 and 1992 respectively.…”

“…From our paper's perspective studies that have made significant contributions to the literature on the OECD countries are Feldstein and Horioka (1980), Feldstein (1983), Sachs (1981, 1983, Caprio and Howard (1984), Penati and Dooley (1984), Feldstein and Bachetta (1991), Tesar (1991), Bodman (1995), Coakley et.al (1996Coakley et.al ( , 2003Coakley et.al ( and 2004, Ghosh (1995), Lemmen and Eijffinger (1995), Barkoulas et al (1996), Tsoulfidis (1997), Hussein (1998), Kim (2001), Blanchard and Giavazzi (2002), Amirkhalkhali et al (2003), Kasuga (2004), Giannone and Lenza (2004), Bahmani-Oskooee andChakrabarti (2005), Georgopoulos andHejazi (2005), Chakrabarti (2006), Katsimi and Moutos (2007), Di Iorio and Fachin (2007), Christopoulos (2007), Grier et.al (2008 and Fouquau et.al (2009 Tesar (1991Tesar ( ) 1960Tesar ( -1986Tesar ( 1960Tesar ( -1974Tesar ( 1975Tesar ( -1986 Giannone and Lenza (2004) 1970-19991970-19791980…”

Governance, Vulnerability to Climate Change, and Green Growth: International Evidence

“…6 The VIF test results are not reported here to conserve space, but they are available upon request. 7 Before the estimation, the stability of the relationship between the variables of interest was examined using the Di Iorio and Fachin (2007)'s test for breaks in cointegrated panels. The results indicate the acceptance of the null hypothesis of no break.…”

The relationship between self-employment and unemployment in the long-run

“…Additionally, our paper overcomes limitations of previous panel data studies that use variables in first differences where country-specific effects are simply differenced out and long-run information is lost (see, for example, Thurik et al, 2008). In this paper, we initially use the methods suggested by Pedroni (1999Pedroni ( , 2004 and Kao (1999), and then implement the approach suggested by Di Iorio and Fachin (2007) to examine the stability of the cointegrating coefficients and estimate the relationship between the two variables allowing for coefficients break.…”