A Saddlepoint Approximation to the Distribution of the Half-Life Estimator in an Autoregressive Model: New Insights Into the PPP Puzzle
Qian Chen and
David Giles ()
No 703, Econometrics Working Papers from Department of Economics, University of Victoria
We derive saddlepoint approximations for the density and distribution functions of the half-life estimated by OLS from an AR(1) or AR(p) model. Our analytic results are used to prove that none of the integer-order moments of these half-life estimators exist. This provides an explanation for the unreasonably large estimates of persistency associated with the purchasing power parity “puzzle”, and it also explains the excessively wide confidence intervals reported in the empirical PPP literature.
Keywords: Saddlepoint approximation; half-life estimator; PPP puzzle (search for similar items in EconPapers)
JEL-codes: C13 C22 F31 F41 (search for similar items in EconPapers)
Pages: 23 pages
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ifn
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0703
Access Statistics for this paper
More papers in Econometrics Working Papers from Department of Economics, University of Victoria PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2. Contact information at EDIRC.
Bibliographic data for series maintained by Graham Voss ().