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Estimation of varying coefficient models with time trend and integrated regressors

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  • Li, Kunpeng
  • Li, Weiming

Abstract

In this paper we extend the semiparametric varying coefficient model to contain non-stationary I(1) and time trend as covariates. We show that the local constant kernel estimation method leads to a consistent estimation result. This is in contrast to the semiparametric varying coefficient model with stationary I(0) and time trend covariates where Liang and Li (2012) show that local constant estimation method leads to inconsistent estimation result. The extra variability of the I(1) regressor restore the consistency of the local constant estimation method. We derive the rate of convergence of the local constant estimators, simulations results strongly support our theoretical analysis.

Suggested Citation

  • Li, Kunpeng & Li, Weiming, 2013. "Estimation of varying coefficient models with time trend and integrated regressors," Economics Letters, Elsevier, vol. 119(1), pages 89-93.
    • Handle: RePEc:eee:ecolet:v:119:y:2013:i:1:p:89-93
    DOI: 10.1016/j.econlet.2013.01.024
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    References listed on IDEAS

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    1. Li, Qi, et al, 2002. "Semiparametric Smooth Coefficient Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 412-422, July.
    2. Cai, Zongwu & Fan, Jianqing & Yao, Qiwei, 2000. "Functional-coefficient regression models for nonlinear time series," LSE Research Online Documents on Economics 6314, London School of Economics and Political Science, LSE Library.
    3. Cai, Zongwu, 2007. "Trending time-varying coefficient time series models with serially correlated errors," Journal of Econometrics, Elsevier, vol. 136(1), pages 163-188, January.
    4. Xiao, Zhijie, 2009. "Functional-coefficient cointegration models," Journal of Econometrics, Elsevier, vol. 152(2), pages 81-92, October.
    5. Cai, Zongwu & Li, Qi & Park, Joon Y., 2009. "Functional-coefficient models for nonstationary time series data," Journal of Econometrics, Elsevier, vol. 148(2), pages 101-113, February.
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    Cited by:

    1. Francesco Bravo, 2020. "Robust estimation and inference for general varying coefficient models with missing observations," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 29(4), pages 966-988, December.

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    More about this item

    Keywords

    Varying coefficient model; Time trend; Local constant estimator; Consistency;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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