Publication Type

Journal Article

Publication Date

12-2017

Abstract

New limit theory is developed for co-moving systems with explosive processes, connecting continuous and discrete time formulations. The theory uses double asymptotics with infill (as the sampling interval tends to zero) and large time span asymptotics. The limit theory explicitly involves initial conditions, allows for drift in the system, is provided for single and multiple explosive regressors, and is feasible to implement in practice. Simulations show that double asymptotics deliver a good approximation to the finite sample distribution, with both finite sample and asymptotic distributions showing sensitivity to initial conditions. The methods are implemented in the US real estate market for an empirical application, illustrating the usefulness of double asymptotics in practical work.

Keywords

Cointegrated system, Explosive process, Moderate deviations from unity, Double asymptotics, Real estate market

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Econometrics

Volume

201

Issue

2

First Page

400

Last Page

416

ISSN

0304-4076

Identifier

10.1016/j.jeconom.2017.08.016

Publisher

Elsevier: 24 months

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

https://doi.org/10.1016/j.jeconom.2017.08.016

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Econometrics Commons

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