Multivariate Contemporaneous-Threshold Autoregressive Models

Michael Dueker, Zacharias Psaradakis, Martin Sola and Fabio Spagnolo

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: This paper proposes a contemporaneous-threshold multivariate smooth transition autoregressive (C-MSTAR) model in which the regime weights depend on the ex ante probabilities that latent regime-specific variables exceed certain threshold values. A key feature of the model is that the transition function depends on all the parameters of the model as well as on the data. Since the mixing weights are also a function of the regime-specific innovation covariance matrix, the model can account for contemporaneous regime-specific co-movements of the variables. The stability and distributional properties of the proposed model are discussed, as well as issues of estimation, testing and forecasting. The practical usefulness of the C-MSTAR model is illustrated by examining the relationship between US stock prices and interest rates.

Keywords: Nonlinear autoregressive model; Smooth transition; Stability; Threshold. (search for similar items in EconPapers)
JEL-codes: C32 G12 (search for similar items in EconPapers)
Pages: 47
Date: 2010-04-22
New Economics Papers: this item is included in nep-ecm and nep-ets
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Related works:
Journal Article: Multivariate contemporaneous-threshold autoregressive models (2011)
Working Paper: Multivariate Contemporaneous Threshold Autoregressive Models (2009)
Working Paper: Multivariate contemporaneous threshold autoregressive models (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:817.10

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