Abstract
A new model of near integration is formulated in which the local to unity parameter is identifiable and consistently estimable with time series data. The properties of the model are investigated, new functional laws for near integrated time series are obtained that lead to mixed diffusion processes, and consistent estimators of the localizing parameter are constructed. The model provides a more complete interface between I(0) and I(1) models than the traditional local to unity model and leads to autoregressive coefficient estimates with rates of convergence that vary continuously between the O(√n) rate of stationary autoregression, the O(n) rate of unit root regression, and the power rate of explosive autoregression. Models with deterministic trends are also considered, least squares trend regression is shown to be efficient, and consistent estimates of the localizing parameter are obtained for this case also. Conventional unit root tests are shown to be consistent against local alternatives in the new class.
| Original language | English |
|---|---|
| Pages (from-to) | 29-69 |
| Number of pages | 41 |
| Journal | Econometric Theory |
| Volume | 17 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2001 Jan 1 |
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All Science Journal Classification (ASJC) codes
- Social Sciences (miscellaneous)
- Economics and Econometrics
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How to estimate autoregressive roots near unity. / Phillips, Peter C.B.; Moon, Hyungsik Roger; Xiao, Zhijie.
In: Econometric Theory, Vol. 17, No. 1, 01.01.2001, p. 29-69.Research output: Contribution to journal › Article
TY - JOUR
T1 - How to estimate autoregressive roots near unity
AU - Phillips, Peter C.B.
AU - Moon, Hyungsik Roger
AU - Xiao, Zhijie
PY - 2001/1/1
Y1 - 2001/1/1
N2 - A new model of near integration is formulated in which the local to unity parameter is identifiable and consistently estimable with time series data. The properties of the model are investigated, new functional laws for near integrated time series are obtained that lead to mixed diffusion processes, and consistent estimators of the localizing parameter are constructed. The model provides a more complete interface between I(0) and I(1) models than the traditional local to unity model and leads to autoregressive coefficient estimates with rates of convergence that vary continuously between the O(√n) rate of stationary autoregression, the O(n) rate of unit root regression, and the power rate of explosive autoregression. Models with deterministic trends are also considered, least squares trend regression is shown to be efficient, and consistent estimates of the localizing parameter are obtained for this case also. Conventional unit root tests are shown to be consistent against local alternatives in the new class.
AB - A new model of near integration is formulated in which the local to unity parameter is identifiable and consistently estimable with time series data. The properties of the model are investigated, new functional laws for near integrated time series are obtained that lead to mixed diffusion processes, and consistent estimators of the localizing parameter are constructed. The model provides a more complete interface between I(0) and I(1) models than the traditional local to unity model and leads to autoregressive coefficient estimates with rates of convergence that vary continuously between the O(√n) rate of stationary autoregression, the O(n) rate of unit root regression, and the power rate of explosive autoregression. Models with deterministic trends are also considered, least squares trend regression is shown to be efficient, and consistent estimates of the localizing parameter are obtained for this case also. Conventional unit root tests are shown to be consistent against local alternatives in the new class.
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UR - http://www.scopus.com/inward/citedby.url?scp=0035630733&partnerID=8YFLogxK
U2 - 10.1017/S0266466601171021
DO - 10.1017/S0266466601171021
M3 - Article
AN - SCOPUS:0035630733
VL - 17
SP - 29
EP - 69
JO - Econometric Theory
JF - Econometric Theory
SN - 0266-4666
IS - 1
ER -