We provide a complete description of the set of all solutions to a vector autore- gressive law of motion. Every solution is shown to be the sum of three compo- nents, each corresponding to a directed flow of time. One component flows for- ward from the arbitrarily distant past; one flows backward from the arbitrarily distant future; and one flows outward from time zero. The three components are obtained by applying three complementary spectral projections to the solution, these corresponding to a separation of the eigenvalues of the autoregressive coef- ficient matrix according to whether they are inside, outside or on the unit circle. We establish a one-to-one correspondence between the set of all solutions and a finite-dimensional space of initial conditions.

The general solution to an autoregressive law of motion / Beare, Brendan K.; Franchi, Massimo; Howlett, Phil. - In: QUANTITATIVE ECONOMICS. - ISSN 1759-7323. - (2026), pp. 1-35.

The general solution to an autoregressive law of motion

BRENDAN K. BEARE;MASSIMO FRANCHI;
2026

Abstract

We provide a complete description of the set of all solutions to a vector autore- gressive law of motion. Every solution is shown to be the sum of three compo- nents, each corresponding to a directed flow of time. One component flows for- ward from the arbitrarily distant past; one flows backward from the arbitrarily distant future; and one flows outward from time zero. The three components are obtained by applying three complementary spectral projections to the solution, these corresponding to a separation of the eigenvalues of the autoregressive coef- ficient matrix according to whether they are inside, outside or on the unit circle. We establish a one-to-one correspondence between the set of all solutions and a finite-dimensional space of initial conditions.
2026
arrow of time, autoregressive process, co-integration, Drazin inverse, non-causal process, spectral projection, unit root.
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The general solution to an autoregressive law of motion / Beare, Brendan K.; Franchi, Massimo; Howlett, Phil. - In: QUANTITATIVE ECONOMICS. - ISSN 1759-7323. - (2026), pp. 1-35.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1763363
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