Finite-time analysis of vector autoregressive models under linear restrictions

Nested reduced-rank autogressive models for multiple time series

Yao Zheng and Guang Cheng

Biometrika, 2021, vol. 108, issue 2, 469-489

Abstract: SummaryThis paper develops a unified finite-time theory for the ordinary least squares estimation of possibly unstable and even slightly explosive vector autoregressive models under linear restrictions, with the applicable region , whereis the spectral radius of the transition matrixin the var(1) representation,is the time horizon and 0$]]> is a universal constant. The linear restriction framework encompasses various existing models such as banded/network vector autoregressive models. We show that the restrictions reduce the error bounds via not only the reduced dimensionality, but also a scale factor resembling the asymptotic covariance matrix of the estimator in the fixed-dimensional set-up: as long as the model is correctly specified, this scale factor is decreasing in the number of restrictions. It is revealed that the phase transition from slow to fast error rate regimes is determined by the smallest singular value of , a measure of the least excitable mode of the system. The minimax lower bounds are derived across different regimes. The developed non-asymptotic theory not only bridges the theoretical gap between stable and unstable regimes, but precisely characterizes the effect of restrictions and its interplay with model parameters. Simulations support our theoretical results.

Keywords: Empirical process theory; Least squares estimation; Non-asymptotic analysis; Stochastic regression; Unstable process; Vector autoregressive model (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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