Moment Approximation for Unit Root Models with Nonnormal Errors

Aman Ullah, Yong Bao and Ru Zhang
Additional contact information
Ru Zhang: University of California, Riverside

No 201401, Working Papers from University of California at Riverside, Department of Economics

Abstract: Phillips (1977a, 1977b) made seminal contributions to time series finite-sample theory, and then, he was among the first to develop the distributions of estimators and forecasts in stationary time series models, see Phillips (1978, 1979), among others. From the mid-eighties Phillips (1987a, 1987b), through his fundamental papers, opened the path of asymptotic (large-sample) theory for the unit root type non-stationary models. This has certainly created a large literature of important papers, including many of Phillips’’own papers. However, not much is known about the analytical finite-sample properties of estimators under the unit root, although see Kiviet and Phillips (2005) for the case when the errors are normally distributed. An objective of this paper is to analyze the …finite-sample behavior of the estimator in the first-order autoregressive model with unit root and nonnormal errors. In particular, we derive analytical approximations for the first two moments in terms of model parameters and the distribution parameters. Through Monte Carlo simulations, we find that our approximate formula perform quite well across different distribution specifications in small samples. However, when the noise to signal ratio is huge, and bias distortion can be quite substantial, and our approximations do not fare well.

Keywords: unit root; nonnormal; moment approximation. (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ger
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://economics.ucr.edu/repec/ucr/wpaper/201401.pdf First version, 2014 (application/pdf)

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:ucr:wpaper:201401

Access Statistics for this paper

More papers in Working Papers from University of California at Riverside, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kelvin Mac ().