Limit Theory for Moderate Deviations from a Unit Root under Weak Dependence

Peter Phillips and Tassos Magadalinos
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Tassos Magadalinos: Dept. of Mathematics, University of York

No 1517, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: An asymptotic theory is given for autoregressive time series with weakly dependent innovations and a root of the form rho_{n} = 1+c/n^{alpha}, involving moderate deviations from unity when alpha in (0,1) and c in R are constant parameters. The limit theory combines a functional law to a diffusion on D[0,infinity) and a central limit theorem. For c > 0, the limit theory of the first order serial correlation coefficient is Cauchy and is invariant to both the distribution and the dependence structure of the innovations. To our knowledge, this is the first invariance principle of its kind for explosive processes. The rate of convergence is found to be n^{alpha}rho_{n}^{n}, which bridges asymptotic rate results for conventional local to unity cases (n) and explosive autoregressions ((1 + c)^{n}). For c

Keywords: Central limit theory; Diffusion; Explosive autoregression, Local to unity; Moderate deviations, Unit root distribution, Weak dependence (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2005-06
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: CFP 1202.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in G. D. A. Phillips and E. Tzavalis, eds., The Refinement of Econometric Estimation and Test Procedures: Finite Sample and Asymptotic Analysis. Cambridge University, 2007, pp.123-162

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