The effects of cross-section dimension n in panel co-integration test

Most studies of panel unit test (PUT) believe that their tests could be extended to panel co-integration test (PCT) directly since PUT and PCT converge sequentially to standard normal distribution in the absence of trends and autocorrelation. But the difference between PUT and PCT cannot be ignored when the cross-section dimensions n is small, especially when n equals 1. In this paper, we examine the effects of cross-sectional dimension n in the translation from PUT to PCT. Based on the numerical simulations, it turns out that although the difference between PUT and PCT decreases with increased value of n, the difference could be ignored in general application only when n is larger than 90.