Publication Type
Journal Article
Version
submittedVersion
Publication Date
8-2013
Abstract
Nielsen (Working paper, University of Oxford, 2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a coexplosive system extension and an illustrative example that helps to explain the finding, gives a consistent instrumental variable procedure, and reports some simulations. Some exact limit distribution theory is derived and a useful new reverse martingale central limit theorem is proved.
Keywords
Co-explosive behavior, Common roots, Endogeneity, Forward instrumentation, Geometric multiplicity, Reverse martingale
Discipline
Econometrics
Research Areas
Econometrics
Publication
Econometric Theory
Volume
29
Issue
4
First Page
808
Last Page
837
ISSN
0266-4666
Identifier
10.1017/S0266466612000709
Publisher
Cambridge University Press
Citation
PHILLIPS, Peter C. B. and MAGDALINOS, Tassos.
Inconsistent VAR Regression with Common Explosive Roots. (2013). Econometric Theory. 29, (4), 808-837.
Available at: https://ink.library.smu.edu.sg/soe_research/1832
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1017/S0266466612000709