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K‐Asymptotics Associated with Deterministic Trends in Integrated and Near‐Integrated Processes

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  • Katsuto Tanaka

Abstract

Dealing with integrated and near‐integrated processes, this paper investigates the validity of regression on deterministic trends of K terms as K becomes large. It is found that the regression tends to be valid in spite of the true process being free from deterministic trends, which implies that the distinction between stochastic and deterministic trends disappears in K‐asymptotics of the integrated and near‐integrated processes. It is also shown that in K‐asymptotics the usual unit root test, based on the model with deterministic trends of K terms, becomes useless against near‐integration since the unit root distribution remains unchanged. JEL Classification Numbers: C12, C15, C22.

Suggested Citation

  • Katsuto Tanaka, 2001. "K‐Asymptotics Associated with Deterministic Trends in Integrated and Near‐Integrated Processes," The Japanese Economic Review, Japanese Economic Association, vol. 52(1), pages 35-63, March.
    • Handle: RePEc:bla:jecrev:v:52:y:2001:i:1:p:35-63
    DOI: 10.1111/1468-5876.00179
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    Cited by:

    1. Tanaka, Katsuto & 田中, 勝人, 2011. "Linear Nonstationary Models : A Review of the Work of Professor P.C.B. Phillips," Discussion Papers 2011-05, Graduate School of Economics, Hitotsubashi University.

    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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