Partially Linear Models with Unit Roots
University of Kansas - Department of Economics
University of Illinois at Urbana-Champaign - Department of Economics
Cowles Foundation Discussion Paper No. 1359
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.
Number of Pages in PDF File: 52
Keywords: Nonparametric, Partial Linear, Semiparametric, Unit Root
JEL Classification: C12, C14, C22working papers series
Date posted: May 10, 2002
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