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Estimation and inference for varying-coeffcient models with nonstationary regressors using penalized splines

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  • Chen, Haiqiang
  • Fang, Ying
  • Li, Yingxing

Abstract

This paper considers estimation and inference for varying-coefficient models with nonstationary regressors. We propose a nonparametric estimation method using penalized splines, which achieves the same optimal convergence rate as kernel-based methods, but enjoys computation advantages. Utilizing the mixed model representation of penalized splines, we develop a likelihood ratio test statistic for checking the stability of the regression coefficients. We derive both the exact and the asymptotic null distributions of this test statistic. We also demonstrate its optimality by examining its local power performance. These theoretical fundings are well supported by simulation studies.

Suggested Citation

  • Chen, Haiqiang & Fang, Ying & Li, Yingxing, 2013. "Estimation and inference for varying-coeffcient models with nonstationary regressors using penalized splines," SFB 649 Discussion Papers 2013-033, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
  • Handle: RePEc:zbw:sfb649:sfb649dp2013-033
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    Cited by:

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    2. Poeschel, Friedrich, 2012. "Assortative matching through signals," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62061, Verein für Socialpolitik / German Economic Association.
    3. Cui, Liyuan & Hong, Yongmiao & Li, Yingxing, 2021. "Solving Euler equations via two-stage nonparametric penalized splines," Journal of Econometrics, Elsevier, vol. 222(2), pages 1024-1056.
    4. Lin, Yingqian & Tu, Yundong, 2024. "Functional coefficient cointegration models with Box–Cox transformation," Economics Letters, Elsevier, vol. 234(C).

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    More about this item

    Keywords

    Nonstationary Time Series; Varying-coefficient Model; Likelihood Ratio Test; Penalized Splines;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • 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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