Inconsistent VAR Regression with Common Explosive Roots

Inconsistent VAR Regression with Common Explosive Roots

Nielsen (Working paper, University of Oxford, 2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a coexplosive system extension and an illustrative example that helps...

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Bibliographic Details
Main Authors: PHILLIPS, Peter C. B., MAGDALINOS, Tassos
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2013
Subjects:
Co-explosive behavior
Common roots
Endogeneity
Forward instrumentation
Geometric multiplicity
Reverse martingale
Econometrics
Online Access:https://ink.library.smu.edu.sg/soe_research/1832
https://ink.library.smu.edu.sg/context/soe_research/article/2831/viewcontent/Inconsistent_VAR_Regression_with_Common_Explosive_Roots.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Nielsen (Working paper, University of Oxford, 2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a coexplosive system extension and an illustrative example that helps to explain the finding, gives a consistent instrumental variable procedure, and reports some simulations. Some exact limit distribution theory is derived and a useful new reverse martingale central limit theorem is proved.

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