Fixed-smoothing Asymptotics and Asymptotic F and t Tests in the Presence of Strong Autocorrelation

Yixiao Sun

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual fixed-smoothing asymptotics under weak dependence to allow for near unit root and weak unit root processes. As the locality parameter that characterizes the neighborhood of the autoregressive root increases from zero to infinity, the new fixed-smoothing asymptotic distribution changes smoothly from the unit-root fixed-smoothing asymptotics to the usual fixed-smoothing asymptotics under weak dependence. Simulations show that the new approximation is more accurate than the usual fixed-smoothing approximation.

Keywords: Social and Behavioral Sciences; Autocorrelation Robust Test; Fixed-smoothing Asymptotics; Local-to-Unity; Strong Autocorrelation; Weak Unit Root (search for similar items in EconPapers)
Date: 2014-05-27
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (10)

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Chapter: Fixed-smoothing Asymptotics and AsymptoticFandtTests in the Presence of Strong Autocorrelation (2014)
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