Estimation and Inference in Threshold Predictive Regression Models with Locally Explosive Regressors

Christis Katsouris

Papers from arXiv.org

Abstract: In this paper, we study the estimation of the threshold predictive regression model with hybrid stochastic local unit root predictors. We demonstrate the estimation procedure and derive the asymptotic distribution of the least square estimator and the IV based estimator proposed by Magdalinos and Phillips (2009), under the null hypothesis of a diminishing threshold effect. Simulation experiments focus on the finite sample performance of our proposed estimators and the corresponding predictability tests as in Gonzalo and Pitarakis (2012), under the presence of threshold effects with stochastic local unit roots. An empirical application to stock return equity indices, illustrate the usefulness of our framework in uncovering regimes of predictability during certain periods. In particular, we focus on an aspect not previously examined in the predictability literature, that is, the effect of economic policy uncertainty.

Date: 2023-05, Revised 2023-05
New Economics Papers: this item is included in nep-des, nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2305.00860 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2305.00860

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().