Confidence intervals for autoregressive coefficients near one

Often we are interested in the largest root of an autoregressive process. Available methods rely on inverting t-tests to obtain confidence intervals. However, for large autoregressive roots, t-tests do not approximate asymptotically uniformly most powerful tests and do not have optimality properties when inverted for confidence intervals. We exploit the relationship between the power of tests and accuracy of confidence intervals, and suggest methods which are asymptotically more accurate than available interval construction methods. One interval, based on inverting the P-T or Q(T) statistic, has good asymptotic accuracy and is easy to compute. (C) 2001 Elsevier Science S.A. All rights reserved.