VARs with Mixed Roots Near Unity

25 Pages Posted: 9 Jan 2012

See all articles by Peter C. B. Phillips

Peter C. B. Phillips

Yale University - Cowles Foundation; University of Auckland; University of Southampton; Singapore Management University - School of Economics

Ji Hyung Lee

Yale University - Department of Economics

Date Written: January 9, 2012

Abstract

Limit theory is developed for nonstationary vector autoregression (VAR) with mixed roots in the vicinity of unity involving persistent and explosive components. Statistical tests for common roots are examined and model selection approaches for discriminating roots are explored.

The results are useful in empirical testing for multiple manifestations of nonstationarity -- in particular for distinguishing mildly explosive roots from roots that are local to unity and for testing commonality in persistence.

Keywords: Common roots, Local to unity, Mildly explosive, Mixed roots, Model selection, Persistence, Tests of common roots

JEL Classification: C22

Suggested Citation

Phillips, Peter C. B. and Lee, Ji Hyung, VARs with Mixed Roots Near Unity (January 9, 2012). Cowles Foundation Discussion Paper No. 1845. Available at SSRN: https://ssrn.com/abstract=1981985 or http://dx.doi.org/10.2139/ssrn.1981985

Peter C. B. Phillips (Contact Author)

Yale University - Cowles Foundation ( email )

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University of Auckland ( email )

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University of Southampton

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Singapore Management University - School of Economics

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Singapore

Ji Hyung Lee

Yale University - Department of Economics ( email )

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New Haven, CT 06520-8268
United States

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