Nonlinear VAR: Some Theory and an Application to the US GNP and Unemployment

F. Altissimo and Giovanni Luca Violante ()

Working Papers from Banca Italia - Servizio di Studi

Abstract: A generalization of the endogenous threshold model is developed by extending this class to multivariate framework and to cases where the feedback acts at multiple lags. The feedback is specified, following Beaudry and Koop, by a variable which measures the depth of recessions. We give conditions for the ergodicity of the model and prove strong consistency of the maximum likelihood estimator, although the objective function is discontinuous in the threshold parameter. The model is applied to a bivariate VAR of output growth and changes in the unemployment rate for the US economy.

Keywords: MATHEMATICAL ANALYSIS; STOCHASTIC MODELS; UNITED STATES; UNEMPLOYMENT; PRODUCTION; ECONOMETRIC MODELS; ESTIMATION OF PARAMETERS (search for similar items in EconPapers)
JEL-codes: C13 C60 E23 E24 (search for similar items in EconPapers)
Date: 1998
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