Local polynomial Whittle estimation covering non-stationary fractional processes

Frank Nielsen

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper extends the local polynomial Whittle estimator of Andrews & Sun (2004) to fractionally integrated processes covering stationary and non-stationary regions. We utilize the notion of the extended discrete Fourier transform and periodogram to extend the local polynomial Whittle estimator to the non-stationary region. By approximating the short-run component of the spectrum by a polynomial, instead of a constant, in a shrinking neighborhood of zero we alleviate some of the bias that the classical local Whittle estimators is prone to. A simulation study illustrates the performance of the proposed estimator compared to the classical local Whittle estimator and the local polynomial Whittle estimator. The empirical justification of the proposed estimator is shown through an analysis of credit spreads.

Keywords: Bias reduction; fractional integration; local polynomial; local Whittle estimation; long memory. (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 43
Date: 2008-06-02
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2008-28

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