Publication Type
Journal Article
Version
acceptedVersion
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
Citation
CHEN, Ye; PHILLIPS, Peter C. B.; and YU, Jun.
Inference in continuous systems with mildly explosive regressors. (2017). Journal of Econometrics. 201, (2), 400-416.
Available at: https://ink.library.smu.edu.sg/soe_research/2111
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/10.1016/j.jeconom.2017.08.016