Estimating Deterministic Trends In The Presence Of Serially Correlated Errors
This paper studies the problems of estimation and inference in the linear trend model y t = α + βt + u t, where u t follows an autoregressive process with largest root ρ and β is the parameter of interest. We contrast asymptotic results for the cases |ρ| < 1 and ρ = 1 and argue that the most useful asymptotic approximations obtain from modeling ρ as local to unity. Asymptotic distributions are derived for the OLS, first-difference, infeasible GLS, and three feasible GLS estimators. These distributions depend on the local-to-unity parameter and a parameter that governs the variance of the initial error term κ. The feasible Cochrane-Orcutt estimator has poor properties, and the feasible Prais-Winsten estimator is the preferred estimator unless the researcher has sharp a priori knowledge about ρ and κ. The paper develops methods for constructing confidence intervals for β that account for uncertainty in ρ and κ. We use these results to estimate growth rates for real per-capita GDP in 128 countries. Â© 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Volume (Year): 79 (1997)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/ |
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beach, Charles M & MacKinnon, James G, 1978. "A Maximum Likelihood Procedure for Regression with Autocorrelated Errors," Econometrica, Econometric Society, vol. 46(1), pages 51-58, January.
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:79:y:1997:i:2:p:184-200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick)
If references are entirely missing, you can add them using this form.