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Title: Band spectral regression with trending data
Authors: Corbae, D.
Ouliaris, S. 
Phillips, P.C.B.
Keywords: Band spectral regression
Deterministic and stochastic trends
Discrete Fourier transform
Distributed lag
Integrated process
Leads and lags regression
Nonstationary time series
Two-sided spectral BN decomposition
Issue Date: 2002
Citation: Corbae, D., Ouliaris, S., Phillips, P.C.B. (2002). Band spectral regression with trending data. Econometrica 70 (3) : 1067-1109. ScholarBank@NUS Repository.
Abstract: Band spectral regression with both deterministic and stochastic trends is considered. It is shown that trend removal by regression in the time domain prior to band spectral regression can lead to biased and inconsistent estimates in models with frequency dependent coefficients. Both semiparametric and nonparametric regression formulations are considered, the latter including general systems of two-sided distributed lags such as those arising in lead and lag regressions. The bias problem arises through omitted variables and is avoided by careful specification of the regression equation. Trend removal in the frequency domain is shown to be a convenient option in practice. An asymptotic theory is developed and the two cases of stationary data and cointegrated nonstationary data are compared. In the latter case, a levels and differences regression formulation is shown to be useful in estimating the frequency response function at nonzero as well as zero frequencies.
Source Title: Econometrica
ISSN: 00129682
Appears in Collections:Staff Publications

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