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Full-Text Articles in Social and Behavioral Sciences
On Confidence Intervals For Autoregressive Roots And Predictive Regression, Peter C.B. Phillips
On Confidence Intervals For Autoregressive Roots And Predictive Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A prominent use of local to unity limit theory in applied work is the construction of confidence intervals for autogressive roots through inversion of the ADF t statistic associated with a unit root test, as suggested in Stock (1991). Such confidence intervals are valid when the true model has an autoregressive root that is local to unity (τ = 1 + ( c/n )) but are invalid at the limits of the domain of definition of the localizing coefficient c because of a failure in tightness and the escape of probability mass. Consideration of the boundary case shows that these …
Vars With Mixed Roots Near Unity, Peter C.B. Phillips, Ji Hyung Lee
Vars With Mixed Roots Near Unity, Peter C.B. Phillips, Ji Hyung Lee
Cowles Foundation Discussion Papers
Limit theory is developed for nonstationary vector autoregression (VAR) with mixed roots in the vicinity of unity involving persistent and explosive components. Statistical tests for common roots are examined and model selection approaches for discriminating roots are explored. The results are useful in empirical testing for multiple manifestations of nonstationarity — in particular for distinguishing mildly explosive roots from roots that are local to unity and for testing commonality in persistence.