Limit theory for mildly integrated process with intercept

Yijie Fei

Economics Letters, 2018, vol. 163, issue C, 98-101

Abstract: Some asymptotic results are given for first-order autoregressive (AR(1)) time series with two features: (i). a nonzero constant intercept (ii). a root moderately deviating from unity. Both stationary and explosive sides are studied. It is shown that the inclusion of intercept will change drastically the large sample properties of the least-squares (LS) estimator obtained in Phillips and Magdalinos (2007, PM hereafter). For near-stationary case, only an unusual convergence of a linear combination of intercept and AR coefficient can be derived. For near-explosive case, on the other hand, the limiting distributions of two estimators will be independent and Gaussian, with conventional t-test for both of them keeping valid. Empirical implication of these limit theory is also discussed.

Keywords: Autoregression; Moderate deviation from unity; Intercept; Limit theory; Bubble (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:163:y:2018:i:c:p:98-101

DOI: 10.1016/j.econlet.2017.12.008

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