Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2021-12-09
Number: 21-107/III
Author-Name: Marina Friedrich
Author-Workplace-Name: Vrije Universiteit Amsterdam, Tinbergen Institute
Author-Name: Yicong Lin
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Sieve Bootstrap Inference for Time-Varying Coefficient Models
Abstract: We propose a sieve bootstrap framework to conduct pointwise and simultaneous inference for time-varying coefficient regression models based on a nonparametric local linear estimator. The asymptotic validity of the sieve bootstrap in the presence of autocorrelation is established. We find that it automatically produces a consistent estimation of nuisance parameters, both at the
interior and boundary points. In addition, we develop a bootstrap test for parameter constancy and show that it is asymptotically correctly sized. An extensive simulation study supports our findings. The proposed methods are applied to assess the price development of CO2 certificates in the European Emissions Trading System (EU ETS). We find evidence of time variation in the relationship between allowance prices and their fundamental price drivers.
Classification-JEL: C14, C22, Q48, Q56
Keywords: sieve bootstrap, nonparametric estimation, simultaneous confidence bands, energy economics, emission trading.
File-URL: https://papers.tinbergen.nl/21107.pdf
File-Format: application/pdf
File-Size: 964.965 bytes
Handle: RePEc:tin:wpaper:20210107