This paper introduces a simple first-difference-based approach to estimation and inference for the AR(1) model. The estimates have virtually no finite-sample bias and are not sensitive to initial conditions, and the approach has the unusual advantage that a Gaussian central limit theory applies and is continuous as the autoregressive coefficient passes through unity with a uniform rate of convergence. En route, a useful central limit theorem (CLT) for sample covariances of linear processes is given, following Phillips and Solo (1992, Annals of Statistics, 20, 971–1001). The approach also has useful extensions to dynamic panels.
Cambridge University Press
PHILLIPS, Peter C. B. and HAN, Chirok.
Gaussian Inference in AR(1) Time Series with or without a Unit Root. (2008). Econometric Theory. 24, (3), 631-650. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/249
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