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INFERENCE ON A SEMIPARAMETRIC MODEL WITH GLOBAL POWER LAW AND LOCAL NONPARAMETRIC TRENDS

Published online by Cambridge University Press:  14 May 2019

Jiti Gao ,
Oliver Linton  and
Bin Peng
Jiti Gao
Affiliation:
Monash University
Oliver Linton*
Affiliation:
University of Cambridge
Bin Peng
Affiliation:
University of Bath
*
*Address correspondence to Oliver Linton, Faculty of Economics, University of Cambridge, Cambridge CB3 9DD, UK; e-mail: [email protected].
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Abstract

We consider a model with both a parametric global trend and a nonparametric local trend. This model may be of interest in a number of applications in economics, finance, ecology, and geology. We first propose two hypothesis tests to detect whether two nested special cases are appropriate. For the case where both null hypotheses are rejected, we propose an estimation method to capture certain aspects of the time trend. We establish consistency and some distribution theory in the presence of a large sample. Moreover, we examine the proposed hypothesis tests and estimation methods through both simulated and real data examples. Finally, we discuss some potential extensions and issues when modelling time effects.

Type
ARTICLES
Information
Econometric Theory , Volume 36 , Issue 2 , April 2020 , pp. 223 - 249
Copyright
Copyright © Cambridge University Press 2019 

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Footnotes

The authors would like to thank Professor Peter C.B. Phillips, Professor Liangjun Su, and the three referees for their constructive suggestions and comments on earlier versions of this article. The first author would like to acknowledge the Australian Research Council Discovery Grants Program for its support under Grant numbers: DP150101012 & DP170104421.

References

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