Partially Linear Models with Unit Roots

52 Pages Posted: 10 May 2002

See all articles by Ted Juhl

Ted Juhl

University of Kansas - Department of Economics

Zhijie Xiao

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: March 2002

Abstract

This paper studies the asymptotic properties of a nonstationary partially linear regression model. In particular, we allow for covariates to enter the unit root (or near unit root) model in a nonparametric fashion, so that our model is an extension of the semiparametric model analyzed in Robinson (1988). It is proven that the autoregressive parameter can be estimated at rate N even though part of the model is estimated nonparametrically. Unit root tests based on the semiparametric estimate of the autoregressive parameter have a limiting distribution which is a mixture of a standard normal and the Dickey-Fuller distribution. A Monte Carlo experiment is conducted to evaluate the performance of the tests for various linear and nonlinear specifications.

Keywords: Nonparametric, Partial Linear, Semiparametric, Unit Root

JEL Classification: C12, C14, C22

Suggested Citation

Juhl, Ted and Xiao, Zhijie, Partially Linear Models with Unit Roots (March 2002). Available at SSRN: https://ssrn.com/abstract=310402

Ted Juhl

University of Kansas - Department of Economics ( email )

Lawrence, KS 66049
United States
785 864-2849 (Phone)

Zhijie Xiao (Contact Author)

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States
217-333-4520 (Phone)
217-244-6678 (Fax)

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