CFDP 1607

Asymptotics for Stationary Very Nearly Unit Root Processes

Author(s): 
Donald W. K. AndrewsPatrik Guggenberger

Publication Date: March 2007

Pages: 8

Abstract: 

This paper considers a mean zero stationary first-order autoregressive (AR) model. It is shown that the least squares estimator and t statistic have Cauchy and standard normal asymptotic distributions, respectively, when the AR parameter ρn is very near to one in the sense that 1 – ρn = (n–1).

Keywords: 

Asymptotics, Least squares, Nearly nonstationary, Stationary initial condition, Unit root

JEL Classification Codes: C22

See CFP: 1220