Asymptotic Confidence Intervals for Impulse Responses of Near-Integrated Processes: An Application to Purchasing Power Parity

Nikolay Gospodinov

No 136, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: Many economic time series are charecterized by high persistence which typically requires nonstandard limit theory for inference. This paper proposes a new method for constructing confidence intervals for the impulse response functions of nearly nonstationary processes. The method is based on inverting the acceptance region of the LR statistic evaluated under a sequence of null hypotheses of possible values for the impulse response. Under the null, the LR statistic can be represented as a ratio of functionals of Ornstein-Uhlenbeck processes and its asymptotic quantiles can be simulated easily. The method is extended to multivariate processes with near-unit roots. The empirical results for the real exchange rates show some support for 3-5 year half-lives reported by Rogoff (1996).

Keywords: impulse responses; near-integrated processes; local-to-unity asymptotics; purchasing power parity (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 (search for similar items in EconPapers)
Date: 2001-04-01
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf1:136

Access Statistics for this paper

More papers in Computing in Economics and Finance 2001 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().