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Estimation of nonstationary nonparametric regression model with multiplicative structure
[Income and wealth distribution in macroeconomics: A continuous-time approach]

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  • Likai Chen
  • Ekaterina Smetanina
  • Wei Biao Wu

Abstract

SummaryThis paper presents a multiplicative nonstationary nonparametric regression model which allows for a broad class of nonstationary processes. We propose a three-step estimation procedure to uncover the conditional mean function and establish uniform convergence rates and asymptotic normality of our estimators. The new model can also be seen as a dimension-reduction technique for a general two-dimensional time-varying nonparametric regression model, which is especially useful in small samples and for estimating explicitly multiplicative structural models. We consider two applications: estimating a pricing equation for the US aggregate economy to model consumption growth and estimating the shape of the monthly risk premium for S&P 500 Index data.

Suggested Citation

  • Likai Chen & Ekaterina Smetanina & Wei Biao Wu, 2022. "Estimation of nonstationary nonparametric regression model with multiplicative structure [Income and wealth distribution in macroeconomics: A continuous-time approach]," The Econometrics Journal, Royal Economic Society, vol. 25(1), pages 176-214.
    • Handle: RePEc:oup:emjrnl:v:25:y:2022:i:1:p:176-214.
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