Cointegration panel data

General
1

Hello,
Can someone explan to me how the pco package work and what do the results mean?

pedroni99(gdi, gds)
$CALL
pedroni99(Y = gdi, X = gds)

$METHOD
[1] "Pedroni(1999) panel tests for cointegration"

$STATISTIC
empirical standardized
nipanel 34.688809 -0.024554841
rhopanel -28.703846 0.403612168
tpanelnonpar -8.971574 -0.529853094
tpanelpar -7.637772 0.538385663
rhogroup -43.106818 0.978667063
tgroupnonpar -10.575789 -0.764380042
tgrouppar -9.958862 0.001412969

2

pedroni99 is the bivariate function in the pco package, that takes two matrices as its arguments. gdi is a data set of Gross domestic investment as a share of GDP (in percent) for 25 high income OECD countries, 2013-2017. gds is Gross domestic savings as a share of GDP (in percent) for 25 high income OECD countries, 1973-2013.

The return values

  • $CALL echos the invocation of the function
  • $METHOD identifies the source of the algorithm
  • $STATISTICS returns nine test statistics

The test statistics are described in Pedroni, Peter, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I., the abstract of which states

Asymptotic distributions and critical values are computed for several residual‐based tests of the null of no cointegration in panels for the case of multiple regressors, including regressions with individual‐specific fixed effects and time trends. The associated cointegrating vectors and the dynamics of the underlying error processes are permitted considerable heterogeneity across individual members of the panel.

and the full text of which should be consulted for additional information.

3

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