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Simulating Properties of the Likelihood Ratio Test for a Unit Root in an Explosive Second-Order Autoregression.

Abstract:

This paper provides a means of accurately simulating explosive autoregressive processes and uses this method to analyze the distribution of the likelihood ratio test statistic for an explosive second-order autoregressive process of a unit root. While the standard Dickey-Fuller distribution is known to apply in this case, simulations of statistics in the explosive region are beset by the magnitude of the numbers involved, which cause numerical inaccuracies. This has previously constituted a ba...

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Journal:
Econometric Reviews
Volume:
26
Publication date:
2007
URN:
uuid:70a3f884-e447-4f0f-ab16-bfd5a246669e
Local pid:
oai:economics.ouls.ox.ac.uk:10414
Language:
English

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