Simulation based estimation of threshold moving average models with contemporaneous shock asymmetry

Huseyin Tastan

MPRA Paper from University Library of Munich, Germany

Abstract: Persistence of shocks to macroeconomic time series may differ depending on the sign or on whether a threshold value is crossed. For example, positive shocks to gross domestic product may be more persistent than negative shocks. Threshold (or asymmetric) moving average (TMA) models, by explicitly taking into account threshold behavior, can help discriminate whether there exists persistence asymmetry. Recently, building on the works of Wecker (1981, JASA, 76(373)) and De Gooijer (1998, JTSA, 19(1)) among others, Guay and Scaillet (2003, JBES, 21(1)) proposed TMA model in which both contemporaneous and lagged asymmetric effects are present and provided indirect inference framework for estimation and testing. This paper builds on their work and examines the properties of efficient method of moments (EMM) estimation of TMA class of models using Monte Carlo simulation experiments. The model is also applied to analyze the persistence properties of shocks in Turkish business cycles.

Keywords: Threshold moving average models; contemporaneous asymmetry; persistence of shocks; Efficient Method of Moments (search for similar items in EconPapers)
JEL-codes: C01 C15 C22 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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