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Full-Text Articles in Social and Behavioral Sciences
Bootstrapping Spurious Regression, Peter C.B. Phillips
Bootstrapping Spurious Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
The bootstrap is shown to be inconsistent in spurious regression. The failure of the bootstrap is spectacular in that the bootstrap effectively turns a spurious regression into a cointegrating regression. In particular, the serial correlation coefficient of the residuals in the bootstrap regression does not converge to unity, so the bootstrap is not even first order consistent. The block bootstrap serial correlation coefficient does converge to unity and is therefore first order consistent, but has a slower rate of convergence and a different limit distribution from that of the sample data serial correlation coefficient. The analysis covers spurious regressions involving …
Nonlinear Instrumental Variable Estimation Of Autoregression, Peter C.B. Phillips, Joon Y. Park, Yoosoon Chang
Nonlinear Instrumental Variable Estimation Of Autoregression, Peter C.B. Phillips, Joon Y. Park, Yoosoon Chang
Cowles Foundation Discussion Papers
Instrumental variable (IV) estimation methods that allow for certain nonlinear functions of the data as instruments are studied. The context of the discussion is the simple unit root model where certain advantages to the use of nonlinear instruments are revealed. In particular, certain classes of IV estimators and associated t -tests are shown to have simpler (standard) limit theory in contrast to the least squares estimator, providing an opportunity for the study of optimal estimation in certain IV classes and furnishing tests and confidence intervals that allow for unit root and stationary alternatives. The Cauchy estimator studied in recent work …