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VARs with Mixed Roots Near Unity

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Abstract

Limit theory is developed for nonstationary vector autoregression (VAR) with mixed roots in the vicinity of unity involving persistent and explosive components. Statistical tests for common roots are examined and model selection approaches for discriminating roots are explored. The results are useful in empirical testing for multiple manifestations of nonstationarity -- in particular for distinguishing mildly explosive roots from roots that are local to unity and for testing commonality in persistence.

Suggested Citation

  • Peter C.B. Phillips & Ji Hyung Lee, 2012. "VARs with Mixed Roots Near Unity," Cowles Foundation Discussion Papers 1845, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1845
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    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d18/d1845.pdf
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    References listed on IDEAS

    as
    1. Ullah, Aman, 2004. "Finite Sample Econometrics," OUP Catalogue, Oxford University Press, number 9780198774488.
    2. Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, vol. 2(3), pages 455-491, November.
    3. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, February.
    4. Magdalinos, Tassos & Phillips, Peter C.B., 2009. "Limit Theory For Cointegrated Systems With Moderately Integrated And Moderately Explosive Regressors," Econometric Theory, Cambridge University Press, vol. 25(2), pages 482-526, April.
    5. Phillips, Peter C.B. & Magdalinos, Tassos, 2007. "Limit theory for moderate deviations from a unit root," Journal of Econometrics, Elsevier, vol. 136(1), pages 115-130, January.
    6. Peter C.B. Phillips, 2008. "Unit Root Model Selection," Cowles Foundation Discussion Papers 1653, Cowles Foundation for Research in Economics, Yale University.
    7. Leeb, Hannes & Pötscher, Benedikt M., 2005. "Model Selection And Inference: Facts And Fiction," Econometric Theory, Cambridge University Press, vol. 21(1), pages 21-59, February.
    8. Xu Cheng & P eter C. B. Phillips, 2009. "Semiparametric cointegrating rank selection," Econometrics Journal, Royal Economic Society, vol. 12(s1), pages 83-104, January.
    9. Phillips, Peter C.B. & Magdalinos, Tassos, 2008. "Limit Theory For Explosively Cointegrated Systems," Econometric Theory, Cambridge University Press, vol. 24(4), pages 865-887, August.
    10. Phillips, Peter C.B. & Magdalinos, Tassos, 2013. "Inconsistent Var Regression With Common Explosive Roots," Econometric Theory, Cambridge University Press, vol. 29(4), pages 808-837, August.
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    More about this item

    Keywords

    Common roots; Local to unity; Mildly explosive; Mixed roots; Model selection; Persistence; Tests of common roots;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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