Comparison of Panel Cointegration Tests

Deniz Dilan Karaman Örsal

Abstract
The main aim of this paper is to compare the size and size-adjusted power properties of four
residual-based and one maximum-likelihood-based panel cointegration tests with the help of
Monte Carlo simulations. In this study the panel-rho, the group-rho, the parametric panel-t,
the parametric group-t statistics of Pedroni(1999} and the standardized LR-bar statistic of
Larsson et al.(2001} are considered. The simulation results indicate that the panel-t and the
standardized LR-bar statistic have the best size and power properties among the five panel
cointegration test statistics evaluated.

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