Skip to main content
×
Home
    • Aa
    • Aa

FUNCTIONAL FORM MISSPECIFICATION IN REGRESSIONS WITH A UNIT ROOT

  • Ioannis Kasparis (a1)
Abstract

We examine the limit properties of the nonlinear least squares (NLS) estimator under functional form misspecification in regression models with a unit root. Our theoretical framework is the same as that of Park and Phillips (2001, Econometrica 69, 117–161). We show that the limit behavior of the NLS estimator is largely determined by the relative orders of magnitude of the true and fitted models. If the estimated model is of different order of magnitude than the true model, the estimator converges to boundary points. When the pseudo-true value is on a boundary, standard methods for obtaining rates of convergence and limit distribution results are not applicable. We provide convergence rates and limit theory when the pseudo-true value is an interior point. If functional form misspecification is committed in the presence of stochastic trends, the convergence rates can be slower and the limit distribution different than that obtained under correct specification.

Copyright
Corresponding author
*Address correspondence to Ioannis Kasparis, Department of Economics, University of Cyprus, P.O. Box 20537, CY-1678 Nicosia, Cyprus; e-mail: kasparis@ucy.ac.cy.
Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

D.M. Bates & D.G. Watts (1988) Nonlinear Regression Analysis and Its Applications. Wiley.

A.W. van der Vaart & J.A. Wellner (1996) Weak Convergence and Empirical Processes: With Applications in Statistics. Springer Series in Statistics. Springer-Verlag.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Econometric Theory
  • ISSN: 0266-4666
  • EISSN: 1469-4360
  • URL: /core/journals/econometric-theory
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 16 *
Loading metrics...

Abstract views

Total abstract views: 79 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 29th June 2017. This data will be updated every 24 hours.