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class14-642-08

# class14-642-08 - Econ 642 Wednesday May 14 class 14 Econ...

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Econ 642, Wednesday May 14, class 14 Econ 642, Wednesday May 14, class 14 Robert de Jong 1 1 Department of Economics Ohio State University Robert de Jong Econ 642, Wednesday May 14, class 14

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Econ 642, Wednesday May 14, class 14 Chapter 18: Advanced Time Series Topics highly persistent series: unit roots , I(1) or random walks Model: y t = y t - 1 + e t Important: testing for a unit root against a stationary alternative Estimate y t = α + ρ y t - 1 + e t or y t = α + β t + ρ y t - 1 + e t and test for ρ = 1 Robert de Jong Econ 642, Wednesday May 14, class 14
Econ 642, Wednesday May 14, class 14 Interest in unit roots: 1 Do shocks carry over indefinitely? 2 Statistical properties of estimators and tests may change Robert de Jong Econ 642, Wednesday May 14, class 14

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Econ 642, Wednesday May 14, class 14 Dickey-Fuller tests: 1 regress Δ y t on intercept and y t - 1 : first type; critical values in Table 18.2 2 regress Δ y t on intercept, time trend and y t - 1 : second type; critical values in Table 18.3 Second type can deal with random walk with drift Δ y t = α + e t where α > 0 Robert de Jong Econ 642, Wednesday May 14, class 14
Econ 642, Wednesday May 14, class 14 Augmented Dickey-Fuller tests: 1 regress Δ y t on intercept, y t - 1 and Δ y t - 1 , ..., Δ y t - p : first type; critical values in Table 18.2 2 regress Δ y t on intercept, time trend, y t - 1 and Δ y t - 1 , ..., Δ y t -

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class14-642-08 - Econ 642 Wednesday May 14 class 14 Econ...

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