Publication Type

Journal Article

Version

acceptedVersion

Publication Date

5-2020

Abstract

In an early article on near-unit root autoregression, Ahtola and Tiao (1984) studied the behavior of the score function in a stationary first order autoregression driven by independent Gaussian innovations as the autoregressive coefficient approached unity from below. The present paper develops asymptotic theory for near-integrated random processes and associated regressions including the score function in more general settings where the errors are tempered linear processes. Tempered processes are stationary time series that have a semi-long memory property in the sense that the autocovariogram of the process resembles that of a long memory model for moderate lags but eventually diminishes exponentially fast according to the presence of a decay factor governed by a tempering parameter. When the tempering parameter is sample size dependent, the resulting class of processes admits a wide range of behavior that includes both long memory, semi-long memory, and short memory processes. The paper develops asymptotic theory for such processes and associated regression statistics thereby extending earlier findings that fall within certain subclasses of processes involving near-integrated time series. The limit results relate to tempered fractional processes that include tempered fractional Brownian motion and tempered fractional diffusions of the second kind. The theory is extended to provide the limiting distribution for autoregressions with such tempered near-integrated time series, thereby enabling analysis of the limit properties of statistics of particular interest in econometrics, such as unit root tests, under more general conditions than existing theory. Some extensions of the theory to the multivariate case are reported.

Keywords

Asymptotics, Fractional integration, Integrated process, Near unit root, Tempered process

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Econometrics

Volume

216

Issue

1

First Page

192

Last Page

202

ISSN

0304-4076

Identifier

10.1016/j.jeconom.2020.01.013

Publisher

Elsevier: 24 months

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jeconom.2020.01.013

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