TITLE:
A Panel Bounds Testing Procedure
AUTHORS:
Georgios Bertsatos, Plutarchos Sakellaris, Mike Tsionas
KEYWORDS:
Banks, Bounds Testing Procedure, Co-Integration, Fixed Effects
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.7,
December
29,
2023
ABSTRACT: We propose a bounds testing procedure (BTP) with a battery of tests for
the existence of a non-degenerate co-integrating relationship in levels, for
long panels. It is a natural extension to
panel data of the respective approach in time series by Pesaran, Shin, and Smith (2001) and extended by Bertsatos,
Sakellaris, and Tsionas (2022). Simulations suggest that standard
inference is not valid for at least one of the tests in our proposed panel BTP.
A computer code that generates
sample-specific critical values is provided. We demonstrate the proposed
BTP by applying alternative model specifications for systemic banks’ market value of equity and extending Rhodes-Kropf,
Robinson, and Viswanathan (2005).