Smoothing Local-to-Moderate Unit Root Theory

Peter C. B. Phillips (), Tassos Magdalinos and Liudas Giraitis
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Tassos Magdalinos: University of Nottingham, UK
Liudas Giraitis: Queen Mary, University of London, UK

No 1659, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: A limit theory is established for autoregressive time series that smooths the transition between local and moderate deviations from unity and provides a transitional form that links conventional unit root distributions and the standard normal. Edgeworth expansions of the limit theory are given. These expansions show that the limit theory that holds for values of the autoregressive coefficient that are closer to stationarity than local (i.e., deviations of the form = 1 + (c/n), where n is the sample size and c < 0) holds up to the second order. Similar expansions around the limiting Cauchy density are provided for the mildly explosive case.

Keywords: Edgeworth expansion; Local to unity; Moderate deviations; Unit root distribution (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2008-05
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