Multivariate Contemporaneous Threshold Autoregressive Models

Michael Dueker, Zacharias Psaradakis, Martin Sola and Fabio Spagnolo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: In this paper we propose 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 a function of the regime-specific contemporaneous variance-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 and discussing the regime specific Granger causality relationships.

Keywords: Nonlinear autoregressive models; Smooth transition; Stability; Threshold. (search for similar items in EconPapers)
JEL-codes: C32 G12 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2009-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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https://www.utdt.edu/download.php?fname=_125201361827983200.pdf (application/pdf)

Related works:
Journal Article: Multivariate contemporaneous-threshold autoregressive models (2011)
Working Paper: Multivariate Contemporaneous-Threshold Autoregressive Models (2010)
Working Paper: Multivariate contemporaneous threshold autoregressive models (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2009-03

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