LIMIT THEORY FOR COINTEGRATED SYSTEMS WITH MODERATELY INTEGRATED AND MODERATELY EXPLOSIVE REGRESSORS

Tassos Magdalinos and Peter C. B. Phillips ()

Econometric Theory, 2009, vol. 25, issue 02, pages 482-526

Abstract: An asymptotic theory is developed for multivariate regression in cointegrated systems whose variables are moderately integrated or moderately explosive in the sense that they have autoregressive roots of the form , involving moderate deviations from unity when 130). Moreover, the limit theory applies without any distributional assumptions and for weakly dependent errors under conventional moment conditions, so an invariance principle holds, unlike the well-known case of an explosive autoregression. This theory validates inference in cointegrating regression with mildly explosive regressors. The special case in which the regressors themselves have a common explosive component is also considered.

Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:cup:etheor:v:25:y:2009:i:02:p:482-526_09

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