Nonlinear Instrumental Variable Estimation of an Autoregression

Peter Phillips, Joon Park and Yoosoon Chang ()

No 1331, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Instrumental variable (IV) estimation methods that allow for certain nonlinear functions of the data as instruments are studied. The context of the discussion is the simple unit root model where certain advantages to the use of nonlinear instruments are revealed. In particular, certain classes of IV estimators and associated t-tests are shown to have simpler (standard) limit theory in contrast to the least squares estimator, providing an opportunity for the study of optimal estimation in certain IV classes and furnishing tests and confidence intervals that allow for unit root and stationary alternatives. The Cauchy estimator studied in recent work by So and Shin (1999) is shown to have such an optimality property in the class of certain IV procedures with bounded instruments.

Keywords: Cauchy estimator; instrumental variable autoregression; nonlinear instruments; sojourn time; unit root (search for similar items in EconPapers)
JEL-codes: C22 C25 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2001-09
New Economics Papers: this item is included in nep-ecm, nep-ent, nep-ets and nep-net
Note: CFP 1087.
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Citations: View citations in EconPapers (1)

Published in Journal of Econometrics (2004), 118(1-2): 219-246

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Journal Article: Nonlinear instrumental variable estimation of an autoregression (2004)
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