Inference on a semiparametric model with global power law and local nonparametric trends

Jiti Gao, Oliver Linton, Bin Peng

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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.

Original languageEnglish
Pages (from-to)223-249
Number of pages27
JournalEconometric Theory
Volume36
Issue number2
DOIs
Publication statusPublished - Apr 2020

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