Publication Type
Journal Article
Version
publishedVersion
Publication Date
4-2023
Abstract
New methods are developed for identifying, estimating, and performing inference with nonstationary time series that have autoregressive roots near unity. The approach subsumes unit-root (UR), local unit-root (LUR), mildly integrated (MI), and mildly explosive (ME) specifications in the new model formulation. It is shown how a new parameterization involving a localizing rate sequence that characterizes departures from unity can be consistently estimated in all cases. Simple pivotal limit distributions that enable valid inference about the form and degree of nonstationarity apply for MI and ME specifications and new limit theory holds in UR and LUR cases. Normalizing and variance stabilizing properties of the new parameterization are explored. Simulations are reported that reveal some of the advantages of this alternative formulation of nonstationary time series. A housing market application of the methods is conducted that distinguishes the differing forms of house price behavior in Australian state capital cities over the past decade.
Discipline
Econometrics | Economic Theory
Research Areas
Econometrics
Publication
Econometric Theory
Volume
39
Issue
2
First Page
221
Last Page
263
ISSN
0266-4666
Identifier
10.1017/S0266466622000342
Publisher
Cambridge University Press
Citation
PHILLIPS, Peter C. B..
Estimation and inference with near unit roots. (2023). Econometric Theory. 39, (2), 221-263.
Available at: https://ink.library.smu.edu.sg/soe_research/2781
Copyright Owner and License
Authors CC-BY
Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.
Additional URL
https://doi.org/10.1017/S0266466622000342