Cointegration Testing in Dependent Panels with Breaks

In this paper we propose panel cointegration tests allowing for breaks and cross-section dependence based on the Continuos-Path Block bootstrap. Simulation evidence shows that the proposed panel tests have satisfactory size and power properties, hence improving considerably on asymptotic tests applied to individual series. As an empirical illustration we examined investment and saving for a panel of 14 European countries over the 1960-2002 period, finding, contrary the results of most individual tests, that the hypothesis of a long-run relationship is compatible with the data.