Document Type
Discussion Paper
Publication Date
1-1-2011
CFDP Number
1777
CFDP Pages
32
Abstract
Nielsen (2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a co-explosive system extension and an illustrative example that helps to explain the finding, gives a consistent instrumental variable procedure, and reports some simulations. Some exact limit distribution theory is derived and a useful new reverse martingale central limit theorem is proved.
Recommended Citation
Phillips, Peter C.B. and Magdalinos, Tassos, "Inconsistent VAR Regression with Common Explosive Roots" (2011). Cowles Foundation Discussion Papers. 2118.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2118