New Simple Tests for Panel Cointegration

We propose two new simple residual-based panel data tests for the null of no cointegration. The tests are simple because they do not require any correction for the temporal dependencies of the data. Yet they are able to accommodate individual specific short-run dynamics, individual specific intercept and trend terms, as well as individual specific slope parameters. A third test that is modified to accommodate for cross-sectionally dependent data is also proposed. We derive the limiting distributions of the tests and show that they are free of nuisance parameters. Our Monte Carlo results suggest that the asymptotic results are borne out well even in very small samples.