Limit theory for an explosive autoregressive process
Xiaohu Wang and
Jun Yu ()
Economics Letters, 2015, vol. 126, issue C, 176-180
Large sample properties are studied for a first-order autoregression (AR(1)) with a root greater than unity. It is shown that, contrary to the AR coefficient, the least-squares (LS) estimator of the intercept and its t-statistic are asymptotically normal without requiring the Gaussian error distribution, and hence an invariance principle applies. The coefficient based test and the t test have better power for testing the hypothesis of zero intercept in the explosive process than in the stationary process.
Keywords: Explosive model; Intercept; Invariance principle; Bubbles (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
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Working Paper: Limit Theory for an Explosive Autoregressive Process (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:126:y:2015:i:c:p:176-180
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