Publication Type

Journal Article

Publication Date

1-2015

Abstract

Large sample properties are studied for a first-order autoregression (AR(1)) with a root greater than unity. It is shown that, contrary to the AR coefficient, 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 coefficient 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.

Keywords

Explosive model, Intercept, Invariance principle, Bubbles

Discipline

Econometrics | Economics

Research Areas

Econometrics

Publication

Economic Letters

Volume

126

First Page

176

Last Page

180

ISSN

0165-1765

Identifier

10.1016/j.econlet.2014.12.004

Publisher

Elsevier

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.

Additional URL

http://dx.doi.org/10.1016/j.econlet.2014.12.004

Included in

Econometrics Commons

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