When function simula returns an estimate of rho to be .99, this function kicks in and ouputs a corrected estimate of rho. Currently, this only works for order 1, i.e. for order > 1, this correction will not get involved.
simulacorrection(x, y, arp, nbs, nbscov, method, scores)the design matrix, including intercept, i.e. the first column being ones.
the response variable.
the order of autoregressive errors.
the bootstrap size for the first bootstrap procedure. Default is 500.
the bootstrap size for the second bootstrap procedure. Default is 500.
the method to be used for fitting. If "OLS", uses the ordinary least square lm; If "RANK", uses the rank-based fit rfit.
Default is Wilcoxon scores
If 0.99 problem is detected, then construct Fisher CI for both initial estimate (in Durbin stage 1) and first bias-corrected estimate (perform only one bootstrap, instead of a loop); if the midpoint of latter is smaller than 0.95, then this midpoint is the final estimate for rho; otherwise the midpoint of the former CI is the final estimate.
By default, when function simula returns an estimate of rho to be .99, this function kicks in and ouputs a corrected estimate of rho. However, users can turn the auto correction off by setting correction="FALSE" in dbfit. Users are encouraged to investigate why the stationarity assumption is violated based on their experience of time series analysis and knowledge of the data.
Shaofeng Zhang (2017). Ph.D. Dissertation.