How to estimate autoregressive roots near unity

A new model of near integration is formulated in which the local to unity p arameter is identifiable and consistently estimable with time series data. The properties of the model are investigated, new functional laws for near integrated time series are obtained that lead to mixed diffusion processes, and consistent estimators of the localizing parameter are constructed. The model provides a more complete interface between I(0) and I(1) models than the traditional local to unity model and leads to autoregressive coefficie nt estimates with rates of convergence that vary continuously between the O (rootn) rate of stationary autoregression, the O (la) rate of unit root reg ression, and the power rate of explosive autoregression, Models with determ inistic trends are also considered, least squares trend regression is shown to be efficient, and consistent estimates of the localizing parameter are obtained For this case also. Conventional unit root tests are shown to be c on sistent against local alternatives in the new class.