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In unit root testing, a piecewise locally stationary process is adopted to accommodate nonstationary errors that can have both smooth and abrupt changes in second- or higher-order properties. Under this framework, the limiting null distributions of the conventional unit root test statistics are derived and shown to contain a number of unknown parameters. To circumvent the difficulty of direct consistent estimation, we propose to use the dependent wild bootstrap to approximate the non-pivotal limiting null distributions and provide a rigorous theoretical justification for bootstrap consistency. The proposed method is compared through finite sample simulations with the recolored wild bootstrap procedure, which was developed for errors that follow a heteroscedastic linear process. Further, a combination of autoregressive sieve recoloring with the dependent wild bootstrap is shown to perform well. The validity of the dependent wild bootstrap in a nonstationary setting is demonstrated for the first time, showing the possibility of extensions to other inference problems associated with locally stationary processes.
This paper studies the asymptotic convergence of computed dynamic models when the shock is unbounded. Most dynamic economic models lack a closed-form solution. As such, approximate solutions by numerical methods are utilized. Since the researcher can
The Environment Kuznets Curve (EKC) predicts an inverted U-shaped relationship between economic growth and environmental pollution. Current analyses frequently employ models which restrict the nonlinearities in the data to be explained by the economi
This paper makes the following original contributions. First, we develop a unifying framework for testing shape restrictions based on the Wald principle. The test has asymptotic uniform size control and is uniformly consistent. Second, we examine the
This paper presents a simple method for carrying out inference in a wide variety of possibly nonlinear IV models under weak assumptions. The method is non-asymptotic in the sense that it provides a finite sample bound on the difference between the tr
We consider the setting in which a strong binary instrument is available for a binary treatment. The traditional LATE approach assumes the monotonicity condition stating that there are no defiers (or compliers). Since this condition is not always obv