Kopecky, Karen A.; Suen, Richard M. H. - Department of Economics, University of California-Riverside - 2009
This paper re-examines the Rouwenhorst method of approximating first-order autoregressive processes. This method is appealing because it can match the conditional and unconditional mean, the conditional and unconditional variance and the first-order autocorrelation of any AR(1) process. This...