Author(s)

Georgios Bertsatos^1,2*, Plutarchos Sakellaris³, Mike Tsionas⁴

¹Centre of Planning and Economic Research, Athens, Greece.
²Gulf One Lab for Computational & Economic Research, Lancaster University, Lancaster, UK.
³Department of Economics, School of Economic Sciences, Athens University of Economics and Business, Athens, Greece.
⁴Department of Economics, Lancaster University Management School, Lancaster, UK.

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).

Banks, Bounds Testing Procedure, Co-Integration, Fixed Effects

Bertsatos, G. , Sakellaris, P. and Tsionas, M. (2023) A Panel Bounds Testing Procedure. Theoretical Economics Letters, 13, 1765-1779. doi: 10.4236/tel.2023.137102.