Limit theory for moderate deviations from a unit root under weak dependence

• Main Authors: PHILLIPS, Peter C. B., Magadalinos, Tassos
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Central limit theory; Diffusion; Explosive autoregression; Local to unity; Moderate deviations; Unit root distribution; Weak dependence; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1117; https://ink.library.smu.edu.sg/context/soe_research/article/2116/viewcontent/10.1.1.183.6875.pdf
• Institution: Singapore Management University

An asymptotic theory is given for autoregressive time series with weakly dependent innovations and a root of the form rho_{n} = 1+c/n^{alpha}, involving moderate deviations from unity when alpha in (0,1) and c in R are constant parameters. The limit theory combines a functional law to a diffusion on D[0,infinity) and a central limit theorem. For c > 0, the limit theory of the first order serial correlation coefficient is Cauchy and is invariant to both the distribution and the dependence structure of the innovations. To our knowledge, this is the first invariance principle of its kind for explosive processes. The rate of convergence is found to be n^{alpha}rho_{n}^{n}, which bridges asymptotic rate results for conventional local to unity cases (n) and explosive autoregressions ((1 + c)^{n}).