Autoregressive Approximations of Multiple Frequency I ( 1 ) Processes ∗

We investigate autoregressive approximations of multiple frequency I(1) processes, of which I(1) processes are a special class. The underlying data generating process is assumed to allow for an infinite order autoregressive representation where the coefficients of the Wold representation of the suitably filtered process satisfy mild summability constraints. An important special case of this process class are MFI(1) VARMA processes. The main results link the approximation properties of autoregressions for the nonstationary multiple frequency I(1) process to the corresponding properties of a related stationary process, which are well known (cf. Section 7.4 of Hannan and Deistler, 1988). First, error bounds on the estimators of the autoregressive coefficients are derived that hold uniformly in the lag length. Second, the asymptotic properties of order estimators obtained with information criteria are shown to be closely related to those for the associated stationary process obtained by suitable filtering. For multiple frequency I(1) VARMA processes we establish divergence of order estimators based on the BIC criterion at a rate proportional to the logarithm of the sample size. JEL Classification: C13, C32