Econometrica: Sep 1984, Volume 52, Issue 5
Approximation to the Finite Sample Distribution for Nonstable First Order Stochastic Difference Equations
S. E. SatchellThis paper considers approximations to the distribution of the least squares estimator of @a in the model @y"t = @a@y"t"-"1 + @u"t where the @u"t are independently distributed N(0, @s^2) and @y"0 is fixed. An Edgeworth approximation for this case is calculated, and compared with results for the stationary case. For |@a| > 1 and fixed @y"0, the asymptotic distribution is found in closed form; when |@a| > 1 and @y"0 = 0, an Edgeworth-type approximation is again calculated; this is compared with exact results.
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