Publication Type

Working Paper

Publication Date

11-2013

Abstract

Large sample properties are studied for a Örst-order autoregression (AR(1)) with a root greater than unity. It is shown that, contrary to the AR coe¢ cient, the least-squares (LS) estimator of the intercept and its t-statistic are asymptotically normal without requiring the Gaussian error distribution, and hence an invariance principle applies. The coe¢ cient based test and the t test have better power for testing the hypothesis of zero intercept in the explosive process than in the stationary process.

Discipline

Economics

Research Areas

Econometrics

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Included in

Economics Commons

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