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Partial parametric estimation for nonstationary nonlinear regressions

  • Kim, Chang Sik
  • Kim, In-Moo

This paper proposes an estimation method for a partial parametric model with multiple integrated time series. Our estimation procedure is based on the decomposition of the nonparametric part of the regression function into homogeneous and integrable components. It consists of two steps: In the first step we parameterize and fit the homogeneous component of the nonparametric part by the nonlinear least squares with other parametric terms in the model, and use in the second step the standard kernel method to nonparametrically estimate the integrable component of the nonparametric part from the residuals in the first step. We establish consistency and obtain the asymptotic distribution of our estimator. A simulation shows that our estimator performs well in finite samples. For the empirical illustration, we estimate the money demand functions for the US and Japan using our model and methodology.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 167 (2012)
Issue (Month): 2 ()
Pages: 448-457

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Handle: RePEc:eee:econom:v:167:y:2012:i:2:p:448-457
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  1. Laurence Ball, 1998. "Another Look at Long-Run Money Demand," NBER Working Papers 6597, National Bureau of Economic Research, Inc.
  2. Qiying Wang & Peter C.B. Phillips, 2006. "Asymptotic Theory for Local Time Density Estimation and Nonparametric Cointegrating Regression," Cowles Foundation Discussion Papers 1594, Cowles Foundation for Research in Economics, Yale University.
  3. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
  4. Yoosoon Chang & Joon Y. Park & Peter C. B. Phillips, 2001. "Nonlinear econometric models with cointegrated and deterministically trending regressors," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-36.
  5. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  6. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July.
  7. Qiying Wang & Peter C. B. Phillips, 2009. "Structural Nonparametric Cointegrating Regression," Econometrica, Econometric Society, vol. 77(6), pages 1901-1948, November.
  8. Ippei Fujiwara & Tomoyuki Nakajima & Nao Sudo & Yuki Teranishi, 2011. "Global Liquidity Trap," KIER Working Papers 780, Kyoto University, Institute of Economic Research.
  9. Park, Joon & Chung, Heetaik, 2005. "Nonstationary Nonlinear Heteroskedasticity in Regression," Working Papers 2004-02, Rice University, Department of Economics.
  10. Peter C.B. Phillips & Joon Y. Park, 1998. "Asymptotics for Nonlinear Transformations of Integrated Time Series," Cowles Foundation Discussion Papers 1182, Cowles Foundation for Research in Economics, Yale University.
  11. Park, Joon Y & Phillips, Peter C B, 2001. "Nonlinear Regressions with Integrated Time Series," Econometrica, Econometric Society, vol. 69(1), pages 117-61, January.
  12. Bae, Youngsoo & Kakkar, Vikas & Ogaki, Masao, 2006. "Money Demand in Japan and Nonlinear Cointegration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1659-1667, September.
  13. Youngsoo Bae & Robert M. de Jong, 2007. "Money demand function estimation by nonlinear cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 767-793.
  14. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.
  15. Chang Sik Kim & Joon Park, 2010. "Cointegrating Regressions with Time Heterogeneity," Econometric Reviews, Taylor & Francis Journals, vol. 29(4), pages 397-438.
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