LINEAR REGRESSION WITH DETERMINISTIC REGRESSORS AND UNIT ROOT IN THE VARIANCE

Abstract

The first part of this paper derives the asymptotic distribution of the ordinary least squares estimator in a linear regression model with deterministic regressors when the variance of the innovations is a function of an integrated time series. In the second part of this paper we study the impact of heteroscedasticity on the standard t-test for the slope coefficient in a linear trend model.