A Seemingly Unrelated Nonparametric Additive Model with Autoregressive Errors

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

3 Scopus Citations
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Original languageEnglish
Pages (from-to)894-928
Journal / PublicationEconometric Reviews
Issue number5
Online published9 Dec 2015
Publication statusPublished - 2016


This article considers a nonparametric additive seemingly unrelated regression model with autoregressive errors, and develops estimation and inference procedures for this model. Our proposed method first estimates the unknown functions by combining polynomial spline series approximations with least squares, and then uses the fitted residuals together with the smoothly clipped absolute deviation (SCAD) penalty to identify the error structure and estimate the unknown autoregressive coefficients. Based on the polynomial spline series estimator and the fitted error structure, a two-stage local polynomial improved estimator for the unknown functions of the mean is further developed. Our procedure applies a prewhitening transformation of the dependent variable, and also takes into account the contemporaneous correlations across equations. We show that the resulting estimator possesses an oracle property, and is asymptotically more efficient than estimators that neglect the autocorrelation and/or contemporaneous correlations of errors. We investigate the small sample properties of the proposed procedure in a simulation study.

Research Area(s)

  • Additive structure, Asymptotic normality, Autoregression, Local polynomial, SCAD penalty, SUR